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COURTYARD BY MARRIOTT HOTEL
RELICENSING FRANCHISE AGREEMENT
BETWEEN
MARRIOTT INTERNATIONAL, INC.
AND
TIMES SQUARE HOTEL OPERATOR, INC.
Location: 307-311 West37th Street, New York, NY 10018
Dated as of: May 27, 2014
771445v3 - CY New York Manhattan/Times Square West, NYSS & ES Form 750558v2 (03/31/20]4)5/20/2014
FILED: NEW YORK COUNTY CLERK 10/10/2019 10:35 AM INDEX NO. 162115/2018
NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
TABLE OF CONTENTS
Page
1. DEFINITIONS....... .. .. __..__.. ........ .....2
2. LICENSE ___...__. ....... ......... . ..... .. . 10
2.1 Limited Grant. ... ........... ................... ................ .....................................................10
2.2 Franchisor's Reserved Rights................................................................................................ 10
2.3 Territory.................................................................................................................................10
3. FEES..... .. ---------.............. ............................. 11
3.1 Application Fee. ........................ .. ... ............... ............... ...................................... ...... ......1 1
3.2 Franchise Fees. ................................. ....................................................................................11
3.3 Marketing Fund Charges; Special Marketing Program FeeS.................................................1 1
3.4 Electronic Systems Fees. .......................................................................................................11
3.5 Other Charges........................................................................................................................ I2
3.6 Travel Expenses and Reimbursement....................................................................................12
3.7 Marriott Agreement Payments...............................................................................................12
3.8 Making of Payments and Performance of Services...............................................................12
3.9 Interest on Late Payments......................................................................................................12
3.10 Taxes......................................................................................................................................13
3.11 Key Money. ...........................................................................................................................13
4. TERM , .......... 14
4.1 Term. ............................................................................................. .......................................144.2 Not Renewable. .....................................................................................................................14
5. SIZE, FINANCING, CONSTRUCTION, AND RENOVATION 14
5.1 Size........................................................................................................................................14
5.2 Financing of the Hotel. ..........................................................................................................14
5.3 Construction/Conversion/Renovation of the Hotel. ..............................................................14
6. SOURCING AND DESIGN APPROVALS ---- ................... ....15
6.1 Furniture, Fixtures, Equipment, Supplies, and Signage. .......................................................15
6.2 Design Approval....................................................................................................................15
7. LOCAL ADVERTISING AND MARKETING, PRICING, AND MARKETING FUNDACTIVITIES............ ........ ... . .................................17
7.1 Franchisee'S Local Advertising and Marketing Programs and Press Releases. ....................177.2 Reservations. Pricing, and Rates. ..........................................................................................17
7.3 Marketing Fund Activities.....................................................................................................187.4 Special Marketing Programs. ................................................................................................19
8. PROPERTY SYSTEM, RESERVATION SYSTEM, AND OTHER ELECTRONICSYSTEMS........ ... .... ............. ___,..... 19
8.1 Systems Installation........................................................................ ................................. ....19
8.2 Reservation System. ....................................................................... ......................................19
8.3 Optional System(s). ...............................................................................................................19
8.4 System Communication Costs...............................................................................................19
8.5 Electronic Systems Provided Under License.........................................................................20
771445v3 CY New York Manhattan/Times Square West NYSS & ES Form750558û(03131/2014)5/20/20l4
FILED: NEW YORK COUNTY CLERK 10/10/2019 10:35 AM INDEX NO. 162115/2018
NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
9. OPERATIONS--- .............. .. .................20
9.1 Operating the Hotel...............................................................................................................20
9.2 System Promotion and Diversion to Other Businesses.........................................................21
9.3 Employees.............................................................................................................................21
9.4 Management and Operation of the Hotel...............................................................................22
10. TRAINING, COUNSELING, AND ADVISORY SERVICES .---¬ -- - ............23
10.1 Training..............................................................................................................................23
10.2 Counseling and Advisory Services.....................................................................................24
11. PHYSICAL FACILITIES, SUPPLIES, AND GOODS ----......... . 24
11.1 Repairs and Maintenance.......................................................................................................24
12. SYSTEM AND STANDARDS; FRANCHISEE ASSOCIATION . .24
12.1 Compliaoce with System and Standards................................................................................24
12.2 Modification of the System and Standards............................................................................25
12.3 Franchisee Association..........................................................................................................25
13. PROPRIETARY MARKS AND INTELLECTUAL PROPERTY ................ 25
13.1 Franchisor's Representations and Responsibility Regarding the Proprietary Marks............25
13.2 Franchisee's Use of System and Intellectual Property..........................................................26
13.3 Franchisee's Use of Other Marks..........................................................................................28
13.4 Internet Website.....................................................................................................................28
14. CONFIDENTIAL INFORMATION; DATA PROTECTION LAWS .......__29
14.1 Confidential Information.......................................................................................................29
14.2 Data Protection Laws.............................................................................................................29
15. ACCOUNTING AND REPORTS..............-- ......... ----................ 29
15.1 Books, Records, and Accounts.......................................................................................... .29
15.2 Reports.............................................................................................................................. ....29
15.3 Franchisor Examination and Audit of Hotel Records............................................................30
16. INDEMNIFICATION AND INSURANCE.... .. ...............................30
16.1 Indemnification......................................................................................................................30
16.2 Insurance................................................................................................................................31
17. TRANSFERABILITY OF INTERESTS............................. ....... ....33
17.1 Transfers of Interests in the Hotel and Franchisee................................................................33
17.2 Transfers of Controlling Ownership Interests.......................................................................33
17.3 Transfers of Passive Investor Interests, Estate Planning, and Death or Mental
Incompetency....................................................................................................................35
17.4 Proposed Transfer to Competitor and Right of First Refusal................................................36
17.5 Interest in Real Estate and Injunctive Relief.........................................................................38
17.6 Survival of Right of First Refusal..........................................................................................38
17.7 Security Interests in the Hotel or Franchisee.........................................................................39
17.8 Proposed Transfers to Specially Designated National or Blocked Person............................39
17.9 Transfers by Franchisor.........................................................................................................39
18. PUBLICLY-TRADED SECURITIES AND SECURITIES OFFERINGS 40
18.1 Franchisee's Obligations.......................................................................................................40
771445v3 CV New York Manhattan/Times Squarc West, NYSS & ES Form 7$0558v2 (03/31/2014)5/20/2014
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NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
18.2 Limited Franchisor Consent. .................................................................................................41
19. DEFAULT AND TERMINATION ..... ............. ... .... . 41
19.1 Immediate Termination.........................................................................................................41
19.2 Termination Upon Notice with Opportunity to Cure. ...........................................................42
19.3 Termination by Franchisor and Liquidated Damages. ..........................................................43
20. POST-TERMINATION .............. .. ........=.. ...............46
20.1 Franchisee Obligations..........................................................................................................46
20.2 Franchisor's Rights Upon Termination or Expiration. ..........................................................48
20.3 Survival..................................................................................................................................48
21. CONDEMNATION AND CASUALTY.... . .. .................. ... . . 48
21.1 Condemnation........................................................................................................................48
21.2 Casualty.................................................................................................................................48
22. COMPLIANCE WITH LAWS; LEGAL ACTIONS ..... . . .49
22.1 Compliance with Laws..........................................................................................................49
22.2 Notice Regarding Legal Actions. ..........................................................................................49
22.3 WAIVER OF JURY TRIAL AND PUNITIVE DAMAGES................................................49
22.4 Specially Designated National or Blocked Person; Anti-Money Laundering.......................49
23. RELATIONSHIPOF PARTIES....... ..............................50
23.1 Reasonable Business Judgment. ............................................................................................50
23.2 Independent Contractor. ........................................................................................................50
24. GOVERNING LAW; INJUNCTIVE RELIEF; COSTS OF ENFORCEMENT . 50
24.1 Governing Law......................................................................................................................50
24.2 Injunctive Relief....................................................................................................................51
24.3 Costs of Enforcement............................................................................................................51
25. NOTICES....................................... . .............. .. 51
25.1 Notices...................................................................................................................................51
26. CONSTRUCTION AND SEVERABILITY; APPROVALS, CONSENTS AND WAIVERS;ENTIRE AGREEMENT....... . ......... . ...-....... . . ... 52
26.1 Construction and Severability. ..............................................................................................52
26.2 Approvals, Consents and Waivers.........................................................................................53
26.3 Entire Agreement...................................................................................................................53
26.4 Amendments..........................................................................................................................53
27. REPRESENTATIONS, WARRANTIES AND COVENANTS................. . 54
27.1 Existence and Power; Authorization; Contravention............................................................54
27.2 Ownership of Franchisee.......................................................................................................54
27.3 Ownership of the Hotel..........................................................................................................54
27.4 Additional Fmnchisee Acknowledgments and Representations............................................54
28. MISCELLANEOUS 56
28.1 Confidential Negotiated Changes..........................................................................................56
28.2 Multiple Counterparts............................................................................................................56
771445v3 CV New York Manhauan/Times Square West. NYSS & ES Form750558v2.(03/31/'014)5/20/2014
FILED: NEW YORK COUNTY CLERK 10/10/2019 10:35 AM INDEX NO. 162115/2018
NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
AMENDMENT TO COURTYARD BY MARRIOTT HOTEL RELICENSING FRANCHISEAGREEMENT REQUIRED BY THE STATE OF ILLINOIS ...58
SCHEDULE 1 COURTYARD BY MARRIOTT BRAND SPECIFIC TERMS .. ............61
EXHIBIT A APPROVED LOCATION, NUMBER OF GUESTROOMS AND OWNERSHIPINTERESTS IN FRANCHISEE ...................... . . .. . . 62
EXHIBIT B CHANGE OF OWNERSHIP RIDER . ... 64
EXHIBIT C RESTRICTED TERRITORY MAP . . . 66
77t445v3 - CY New York Manhaunn/Times Square West, NYSS & ES Form 750558v2 (03/31/2.014)5/20/2014
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FILED: NEW YORK COUNTY CLERK 10/10/2019 10:35 AM INDEX NO. 162115/2018
NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
COURTYARD BY MARRIOTT HOTEL RELICENSING FRANCHISE AGREEMENT
This Courtyard by Marriott Hotel Relicensing Franchise Agreement is effective as of the27*
dayof May, 2014 ("Effective Date") by Marriott International, Inc., a Delaware corporation, and Times
Square Hotel Operator, Inc., a Delaware corporation ("Franchisee").
RECITALS:
A. Franchisor owns the System.
B. SBCO-NYC OWNER, LLC ("Existing Franchisee") and Franchisor are parties to a
System Hotel franchise agreement ("Existing Franchise Agreement") for the operation of the Hotel
(defined below).
C. Existing Franchisee and CWI Times Square Hotel, LLC, a Delaware limited liability
company and an Affiliate of Franchisee ("Owner") are parties to that certain Agreement of Purchase and
Sale dated March 4, 2014 ("Purchase Agreeinent"), pursuant to which Owner has purchased the Hotel
from Existing Franchisee (the "Hotel Purchase Transaction").
D. Existing Franchisee desires to terminate the Existing Franchise Agreement in connection
with the consummation of the Hotel Purchase Transaction.
E. Franchisor has agreed to terminate the Existing Franchisc Agreement on the terrns set
forth in a Termination Agreement and Release between Existing Franchisee and Franchisor (the
"Tennination Agreement").
F. Pursuant to the Tennination Agreement, the tennination of the Existing Franchise
Agreeincht is not effective unless, among other things, this Agreement has become effective in
accordance with its terms.
G. Franchisee desires that the Hotel remain in the System after terraination of the ExistingFranchise Agreement and Franchisce desires to operate the Hotel under Franchisor's System at the
location specified herein and to obtain a franchise from Franchisor for that purpose.
H. f ranchisee has entered into that certain Operating Lease Agreement dated as of the datehereof (the "Lease") with Owner, pursuant to which Owner has leased the Hotel to Franchisee and
Franchisec has rights to operate the Hotel, and Franchisee desires to operate the Hotel as a System Hotel
and wishes to obtain a license to use the System and the Proprietary Marks for that purpose.
I. Owner, Franchisor and Franchisce are parties to that certain Owner Agreement dated as
of the date hereof with respect to the Hotel (the "Owner Agreement").
J. It is the intention of the parties that the Hotel, together with other System Hotels will be
part of a chain of hotels providing distinctive, high quality hotel services.
K. It is important that the Hotel be operated in strict conformity with the System in order to
enhance public acceptance of, and demand for, all System Hotels.
L. The Hotel opened for business as a System Hotel on May 24, 2013 (the "Opening Date"),and was operated under Franchisor's System from the Opening Date until termination of the ExistingFranchise Agreement pursuant to the Termination Agreement.
77l445v3 - CY New York Manhattan'Fimes Square West NYSS & ES Form 750558v2 (03/31/2.014)5/20/2014
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NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
M. ln agreeing to grant the non-exclusive license under this Agreement to Franchisee,Franchisor is relying upon the business skill, f!!3nnc' 1 capacity, and character of Franchisee and its
principals and the guarantee by Guarantor under the Guaranty.
N. Certain modilications to this Agre. m —„; are required in order to account for the fact that
the Hotel was opened and operating before the Effective Date, which are set forth in the Change of
Ownership Rider attached hereto as Exhibit B.
NOW, THLREFORFe in consideration ot thc premises and thc mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Franchisee and Franchisor agree as follows:
I. DEFIN I'I IOlhh S
When used in this Agreement the following terms have the meanings indiicated:
"AAA Rules"has the meaning stated in Section 17.4,
"AccountinPeriod"
means any one of thc twelve (12) months in a c-lc "-. year or any other
fiscal accounting and reporting period used by Franchisee and approved by Franchisor in writing.
"Affiliate"means, for any Person, a Person that is directly (or indirectly through one or more
intermediaries) Controlling, Controlled by, or under common Control with, such Person.
*'~Areemenf*means this Courtyard by Marriott Hotel Relicensing Franchise Agreement.,
including any exhibits, attachments, and addenda.
"A~licableLaw"
means all laws, regulations, ordinances, rules, orders, decrees, and
requirements ot any governmental authority having jurisdiction over the Hotel, Franchisec, Ct!arantor or
any ol the Marriott Agreements,
"A rovedLocation"
means the site or parcel of land described under item 1 on Fxhibit A.
"Arbitrator"has thc meaning stated in Section 17.4.
"Association'has the meaning stated in Section 12,3.
"Brand"has the meaning stated in the definition of "Competitor."
"CaseGoods"
means turniture and fixtures used in thc Hotel, its Guestroorns, and its Public
Facilities, such as chests, arinoires, chairs, beds, headboards, desks, tables, television sets, mirrors,
pictures, wall decorations, graphics and all other unspecified items ot the saine class.
"~Cate o" means a group of System Hotels designated by Franchisor or its Affiliates, in their
sole discretion. based upon certain criteria, such as geographic (e,g„worldwide, regional, state-specific,
country-specific) or other attributes (e.g,, resorts, urban, suburban). A Category may have specific
physical and operating standards and policies or may be a descriptive classification.
'*~Cornetitor'
means any Person that owns or has an interest in a hotel brand, trade name,
trademark, system, or chain (a"Brand"
) or any Person that has, directly or indirectly, an Ownership
771445v3 CY )s/eu York Manhattan/Times Square 'Wast, )s/YSs k. Es Fest 75055sv2 (03/3n20!4)5/ 0,'2014
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Interest in, or is an Affiliate, principal, director, officer, or other individual with management
responsibility of, a Person that owns or has an interest in a Brand that is comprised of at least (i) twenty
(20) full-service hotels, or (ii) tifty (50) limited-service hotels. For the purposes of defining"Competitor," "full-service"
hotels are hotels that typically offer threc (3) meals per day and have an
average of three thousand (3,000) square feet or more of meeting space per hotel, and"limited-service"
hotels are hotels that are not"full-service" hotels. No Person will be deemed to be a Competitor if such
Person has an interest in a Brand merely as a franchisee or as a mere passive investor that has no Control
or influence over the business decisions concerning the Brand at issue, such as limited partners in a
partnership or as a mere non-Controlling stockholder in a corpomtion.
"Comp_etitor LiauidatedDamages"
has the meanmg stated in Section 19.3.C.
"Confidential Information"means any or all of the following information: (i) any Standards,
documents, or trade secrets approved for use in the System or in the design, construction, renovation or
operation of the Hotel; (ii) any Electronie Systems and accompanying documernation developed for the
System or elements thereof; (iii) Guest Profile Data; or (iv) any other confidential information,
knowledge, trade secrets, business information or know-how obtained (a) through the use of any part of
the System ar concerning the System or the operation of the Hotel or (b) under any Marriott Agreements.
"Control"(and any form thereof, such as
"Controlling"or "Controlled") means, for any Person,
the possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of such Person.
"Control Affiliate"means an Affiliate of Franchisee that directly or indirectly Controls
Franchisee.
"Data ProtectionLaws"
means data protection and privacy laws and regulations in the United
States.
"DesianCriteria" means those Standards that comprise the design criteria and such other
information that is necessary for planning and construction or renovation and refurbishment of a SystemHotel.
"Dispute"means any dispute, controversy, or claim arising out of or relating to this Agreement or
any other Marriott Agreement, or the making, breach, termination, or invalidity of this Agreement or anyother Marriott Agreement. or the relationship created by any of those agreements.
"Effective Date"has the meaning stated in the preamble to this Agreement.
"ElectronicSystems"
means all Software, Hardware and all electronic access to Franchisor's
systems and data, licensed or made available to Franchisee relating to the System, including the
Reservation System, the Property System, the Yield Management System, and any other system
established under Section 8.3 or Section 12.2.
"Electronic Systems Fees"means the Reservation System Fee, the Property System Fee, the
Yield Management System Fee, and the fees for any other system established under Section 8.3 or
Section 12.2.
"Electronie Systems LicenseAgreement" means the electronic systems license agreement that
must be executed by Franchisee as a condition to using the Electronic Systems, the current form of which
is set forth in the Franchise Disclosure Document.
77l445v3 -- CY New York Manhauan/Times Square West NYSS & ES Form 750558v2 (0313|/2014)5/20/2014
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NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 10/10/2019
"Existing FranchiseAgreemenf'
has the meaning stated in the Recitals.
"ExistingFranchisee"
has the meaning stated in the Recitals.
"FF&E"means Case Goods, Soft Goods, signage, and equipment (including telephone systems,
facsimile machines, copiers, vending machines, games, and electronic systems, such as equipment needed
for the Electronic Systems), but does not include any item included in Fixed Asset Supplies.
"FinancedPool"
has the meaning stated in Section 5.2.
"Fixed AssetSupplies"
means supply items included within "Property andEquipment"
under the
Uniform System, including linen, chiua, glassware, silver, uniforms, and similar items.
"Franchise DisclosureDocument"
means that certain document provided by Franchisor to
prospective fmuchisees of System Hotels as required by the trade regulation rule of the Federal Trade
Commission entitled "Disclosure Requimments and Prohibitions ConcerningFranchising,"
as such
document may be updated from time to time by Franchisor.
"Franchisee"has the meaning stated in the preamble to this Agreement.
"FranchiseFees" has the meaning stated in Schedule 1.
"Franchisor" means Marriott International, Inc., a Delaware corporation, and its successors and
assigns.
"Franchisor LodgingFacilities"
means all hotels and other lodging facilities, chains, brands, or
hotel systems owned, leased, under development, or operated or franchised or licensed, now or in the
future, by Franchisor or any of its Affiliates, including: (i) Marriott Hotels, Resorts and Suites; Marriott
Mamuis Hotels; JW Marriott Hotels & Resorts; Marriott Conference Centers; J W Marriott Marquis
Hotels; Marriott Executive Apartments; Courtyard by Marriott Hotels; Fairfield Inn by Marriott Hotels;Fairfield Inn & Suites by Marriott Hotels; Fairfield by Marriott Hotels; Gaylord Hotels; Moxy Hotels;Renaissance Hotels; Renaissance ClubSport; Autograph Collection Hotels; AC Hotels by Marriott;Residence Inn by Marriott Hotels; Bvlgari Hotels and Resorts; Edition Hotels; Ritz-Carlton Hotels and
Resorts; SpringHill Suites by Marriott Hotels; and TownePlace Suites by Marriott Hotels; (ii) whole
ownership facilities and other lodging products or concepts, including JW Marriott Residences; Marriott
Marquis Residences; Grand Residences by Marriott; The Ritz-Carlton Residences; and The Residences at
The Ritz-Carlton; (iii) vacation, timesharing, interval or fractional awnership facilities, or other
destination club business, including Marriott Vacation Club; Marriott Vacation Club International, The
Ritz-Carlton Club; and The Ritz-Carlton Destination Club; and (iv) any other lodging product or concept
developed or utilized by Franchisor or any of its Affiliates in the future.
"Frequent TravelerProgram(s)"
means the loyalty program(s) for System Hotels and such other
Franchisor Lodging Facilities signated by Franchisor or its Affiliates designed to increase the market
share, length of stay and frequency of usage of such Franchisor Lodging Facilities, and/or any similar,
complementary, or successor program. As of the Effective Date, such programs include "MarriottRewards."
"GrossRevenues"
means gross revenues and receipts of every kind (without netting for charge
hacks, credit card service charges, or uncollectible amounts), from all parts of and in connection with the
Hotel, including revenues from leases, entals, memberships, concessions, service charges, fees, sales,
Gross Room Sales and revenues and receipts from all other operations, but not including any: (a) tips,
771445v3 CV New York Manhattan/Times Square West, NYSS & ES Fonn 750558 v2 (03/3 1/2014)5/20/2014
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service charges, or gratuities to Hotel employees to the extent actually received by the Hotel employees;
(b) proceeds from the sale of the Hotel's FF&E; (c) proceeds from insurance policies, other than business
interruption, loss of income or other similar insurance for the Hotel, or (d) any sales tax, value added tax,or similar taxes.
"Gross RoomSales"
means: (i) gross sales and receipts of every kind that accrue from the rental
of Guestrooms (without netting for charge backs, credit card service charges, or uncollectible amounts),
including no-show revenue, early departure fees, late check-out fees and other revenues allocable to
rooms revenue pursuant to the Unifonn System, but not including any sales tax, value added tax, or
similar taxes; (ii) resort fees and mandatory surcharges for facilities (although inclusion of such fees or
surcharges does not constitute approval by Franchisor of such fees and surcharges, which may be limited
or prohibited by Franchisor); (iii) attrition or cancellation fees that are collected from groups that cancel
or do not fulfill their guaranteed number of reservations for Guestrooms; and (iv) the amount of all lost
revenues and receipts due to the non-availability of Guestrooms, upon which business interruption, loss of
income, or other similar insurance proceeds are calculated.
"Guarantor"means individually and collectively the Person(s) who guarantee(s) the performance
of Franchisee's obligations under this Agreement and the other Marriott Agreements under the Guaranty.
"Guaranty"means a guaranty executed and delivered by Guarantor for the benefit of Franchisor,
the current fonn of which is set forth in the Franchise Disclosure Document.
"Guest ProfileData"
means personal guest profiles and information regarding guest preferences,
including any information derived from or contained in any Frequent Traveler Program.
"Guestroom"means each rentable unit in the Hotel consisting of a room, suite or suite of rooms
generally used for overnight guest accommodation, entrance to which is controlled by the same key;provided that adjacent rooms with connecting doors that can be locked and rented as separate units are
considered separate Guestrooms.
"H.ardware"means all computer hardware and other equipment (including all future upgrades,
enhancements, additions, substitutions, and other modifications thereof) required for the operation of and
connection to any Electronic System,
"Hotel"means the hotel and all land used in connection with the hotel located or to be located at
the Approved Location, including: (i) the freehold or long-term leasehold title to the Approved Location;
(ii) all improvements, structures, facilities, entry and exit rights, parking, pools, landscaping, and other
appurtenances (including the hotel huilding, Public Facilities, and all operating systems) located at theApproved Location; and (iii) all FF&E, Fixed Asset Supplies, and Inventories installed or located in such
improvements at the Approved Location.
"Hotel PurchaseTransaction" has the meaning stated in the Recitals.
"Initial AccountingPeriod"
has the meaning stated in Section 3.1 l.
"IntellectualProperty"
means all of the following items, regardless of the fonn or medium
involved (e.g., paper, electronic, tape, tangible or intangible): (i) all Software, including the data and
infonnation processed or stored by such Software; (ii) all Proprietary Marks; (iii) all Confidential
Information; and (iv) all other intbnnation, materials, and copyrightable or patentable subject matter
owned, developed, acquired, licensed, or used by Franchisor or any of its Affiliates in connection with the
Systein.
771445v3 ---CY New York Manhanan/Times Square West NYSS & ES Form 750558v2 (03/31/2014)5/20/2014
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"Interestholders"means, with respect to any Person, any Person that directly or indirectly hoMs
an Ov nership Interest in that I'erson,
"hitcrcstRate"
means the lesser of e;gh:cc- percent (18'/o) per annum or the maximum interest
rate perinitted by law.
"inve~tories"means
"inventories"as deflined in the Uniform System, including: (i) provisions in
storerooms, refrigerators, pantries, and kitchens; (ii) beverages in wine cellars and bars; (iii) other
merchandise intended for sale; (iv) fuel; (v) rnt'cha!si 'al supplies; (vi) stationery; and (vii) other expensed
supplies and similar items.
"InventoryManagement"
means those inventory manageme»t services made available byFranchisor to Franchisee under optional revenue management consulting arrangements,
"~tre Mone'*
has the meaning stated in Section 3.1i.
'Lease"has the meaning stated in the Recitals,
"Lender"means any Person that (a) is in the business of cri= = 'rtg and making loans (as
opposed to buying loans) as its primary busmess '--:I "':= private lenders and any Person chartered as a
state or federal bank, thrift, or savings and loan, and insured by the FDIC or FSLIC, and (b) is not a
Competitor or an Affiliate of a Competitor.
"Local Advertisin~ Promatns" means local advertising, marketing, proinotional, sales and public
relations programs and activities for the Hotel, and Marketing Materials used in connection therewith.
"Manamrnent C<»n an "has the meaning stated in Section 9.4.A.
Management Coinpany, Franchisee and Franchisor, the current form of which is set forth in the Franchise
Disclosure Docume»t.
"Marketine Fund Activities" means: (i) brand strategy, bra~d voice, and brand development
activities; (ii) the creation, production, and administration of Marketing Materials; (iii) the placement of
Marketing Materials in magazines, newspapers, and similar printed, digital or electronic media or social
media sites; (iv) the purchase of advertising on radio, television,'out-of-home"
media, the i~ternet, and
other electronic or digital media; (v) advertising, marketing, promotional, public relations, events and
partnerships, revenue manage —„,—»t, and reservations activities, and sales campaigns, prograins, seminars
and other activities designed to increase sales or public aware»ess of the System, including pt!hi!car!oti
and distribution of directories (whether offline or online), pamphlets and other forms of advertisingmedia; (vi) market research and oversight and management of the guest satisfaction program and
Frequent Traveler Programs; and (vii) the retention or employment of personnel, advertising agencies,
marketing consultants, and other professionals or specialists to assist in the development and
implementation of any of the foregoing.
"~Marketin i'undCharge*'
has the meaning stated in Schedule i.
'Marketi» Funds"means monies collected and used by Franchisor and its Affiliates for
Market i ng Fund Ac ti v it ics.
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"MarketingMaterials"
means all advertising, marketing, promotional, sales and public relations
concepts, press releases, materials, copy, concepts, plans, programs, brochures, or other information to be
released to the public, whether in paper, digital, electronic or computerized form, or in any form of media
now or hereafter developed.
"MarriottAgreement(s)"
means, collectively, this Agreement, any other agreements executed in
connection with this Agreement, and any other agreement related to the Hotel to which Franchisee,
Guarantor or any of their respective Affiliates is a party and to which Franchisor or its Affiliates is also a
party or beneficiary, as any may be amended, modified, supplemented, or restated.
"OpeningDate"
has the meaning stated in the Recitals.
Other LodgineProduct"
has the meaning stated in Section 21.2.
"OtherMark(s)"
means any trademark, trade name, symbol, slogan, design, insignia, emblem,
device, or service mark that is not a Proprietary Mark.
"Owner"has the meaning stated in the Recitals.
"OwnerAgreement"
has the meaning stated in the Recitals.
"OwnershipInterest"
means all forms of ownership of legal entities ar property, both legal and
beneficial, voting and non-voting, including stock interests, partnership interests, limited liability company
interests, joint tenancy interests, leasehold interests, poprietorship ^interests, trust beneficiary interests,
proxy interests, power-of-attorney interests, and all options, warrants, and any other forms of interest
evidencing awnership or Control.
"Passive InvestorIntere_sis"
has the meaning stated in Section 17.3.
"Person"means an individual, a partnership, a corporation, a limited liability company, a
government, or any department or agency thereof, a trustee, a trust, an unincorporated organization, or
any other entity of any kind.
"PIP"has the meaning stated in Section 17,2.A(1)(d).
"PropertySystem" means all property systems (including all Software, Hardware and electronic
access related thereto) designated by Franchisor for use by System Hotels in the front office, back-of-the-
house, or other operations of System Hotels.
"Property System Fec"means the fee Franchisee must pay as required by Franchisor representing
the Hotel's share of the costs and expenses of the Property System, including development and
incremental operating costs, ongoing maintenance, field support costs, and a reasonable return on capital.
"ProprietaryMarks"
means any trademarks, trade names, trade dress, words, symbols, logos,
slogans, designs, insignia, emblems, devices, service marks, and indicia of origin (including restaurant
names, lounge names, or other outlet names), or combinations thereof, that are registered by Franchisor or
any of its Affiliates, or are used to identify or are otherwise associated by virtue of usage with System
Hotels, all as may be changed, deleted, added to or otherwise modified by Franchisor or its Affiliates in
their sole discretion. The term applies whether the Proprietary Marks are owned currently by Franchisor
or any of its Affiliates, or are later developed or acquired, and whether or not they are registered in any
state, foreign country or in the United States Patent and Trademark Office.
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"Prospectus"means any registration statement, solicitation, prospectus (preliminary or
otherwise), memorandum, offering document, or similar documentation for the sale or transfer of an
Ownership Interest, including any related amendments.
"PublicFacilities"
means any meeting rooms, conference rooms, convention or banquet facilities,
restaurants, bars, lounges, and all other similar public facilities.
"PurchaseAgreement"
has the meaning stated in the Recitals.
"Oualifyine TransferEvent" has the meaning stated in Section 3.11.
"Ouality AssuranceProgram" means the quality assurance program that Franchisor uses to
monitor guest satisfaction and the operations, facilities and services at System Hotels.
"Reasonable BusinessJudgment"
has the meaning stated in Section 23.I.
"RenovationDrawings""
has the meaning stated in Section 6.2.A.
"ReservationSystem"
means any reservation system designated by Franchisor for System Hotels
(including all Software, Hardware and electronic access related thereto).
"Reservation SystemFee"
means the fee Franchisee must pay to Franchisor representing the
Hotel's share of the costs and expenses of the Reservation System, including development and
incremental operating costs, ongoing maintenance, field support costs, and a reasonable return on capital.
"RestrictedTerritory"
has the meaning stated in Section 2.3.
"SalesAgent"
means Franchisor acting on behalf of Franchisee for purposes of (i) Inventory
Management, (ii) booking reservations at the Hotel or other booking activities, including accessing the
Reservation System, or (iii) sales activities, including arranging group sales. Where Franchisor is Sales
Agent for Franchisee, Franchisee consigns hotel inventory to Franchisor and retains all risk of loss of
unsold or cheaply sold inventory.
"SoftGoods"
means textile, fabric and vinyl and similar products used in finishing and
decorating the Hotel, its Guestrooms, corridors and Public Facilities, such as vinyl wall and floor
coverings, drapes, sheers, cornice coverings, carpeting, bedspreads, lamps, lamp shades, artwork, task
chairs, upholstery and all other unspecified items of the same class.
"Software"means all computer software and accompanying documentation (including all future
enhaixements, upgrades, additions, substitutions, and other modifications) provided to Franchisee by or
through Franchisor and/or third parties designated by Franchisor or its Affiliates required for the
operation of and connection to any Electronic System.
"SoecialCircumstañces"
has the meaning stated in Section 19.3.B.
"Special Circumstances LiauidatedDamages"
has the meaning stated in Section 19.3.B.
"Specially Desienated National or BlockedPerson" means: (i) a Pemon designated by the U.S.
Department of Treasury's Office of Foreign Assets Control from time to time as a "specially designated
national or blockedperson"
or similar status; (ii) a Person described in Section 1 of U.S. Executive Order
13224, issued on September 23, 2001; or (iii) a Person otherwise identified by government or legal
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authority as a Person with whom Franchisor, or any of its Affiliates, are prohibited from transactingbusiness.
"Special MarketingPrograms"
means, as further described in Section 7.4, advertising, marketing,
promotional, public relations, and sales programs and activities that are not designated by Franchisor as
Marketing Fund Activities.
"Standards"means Franchisor's operating rules, manuals, standard operating procedures and
other procedures, systems, guides, programs (including the Quality Assurance Program), requirements,
directives, standards, specifications, design criteria, and such other infonnation, initiatives and controls
that are necessary for planning, designing, constructing, renovating, refurbishing, and operating System
Hotels (including the Design Criteria), as such may be modified, amended or supplemented by Franchisor
or its Affiliates in accordance with Section 12.2 (and which may, with Franchisor's prior approval, take
into account specific characteristics and conditions of the local market). The Standards may be in paper
or in clectronic form.
"System"means the Standards, Intellectual Property and other distinctive, distinguishing
elements or characteristics that Franchisor or its Affiliates have developed, designated or authorized for
the operation of System Hotels as such may be modified, amended or supplemented hy Franchisor or its
Affiliates in accordance with Section 12.2 including: the Reservation System, the Property System, the
Yield Management System, the Electonic Systems, the Software, the Frequent Traveler Program(s), the
Marketing Fund Activities, Special Marketing Programs, Training Programs, and other advertisingprograms and training.
"SystemHotel"
has the meaning stated in Schedule 1.
"Taxes means all taxes (including any sales, gross receipts, value-added or goods and services
taxes), levies, charges, impositions, stamp or other duties, fees, deductions, withholdings or other
payments levied or assessed hy any competent govemmer2tal authority, including by any federal, national,
state, provincial, local, or other tax authority.
"Term"has the meaning stated in Section 4.1.
"Tenn Expiration Date"has the meaning stated in Section 21.2.
"Termination Agreement"has the meaning stated in the Recitals.
"Transfer"means any sale, conveyance, assignment, exchange, pledge, encumumnce, lease or
other transfer or disposition, directly or indirectly, voluntarily or involuntarily, absolutely or
conditionally, by operation of law or otherwise..
"TransferFee"
has the meaning stated in Section 17.2.A(1)(c).
"TravelExpenses"
means all travel, food and lodging, living, and other out-of-pocket costs and
expenses.
"Unamortized Portion of the KeyMoney"
has the meaning stated in Section 3.11.
"Uniform System"means the Uniform System of Accounts for the Lodging Industry, Tenth
Revised Edition, 2006, as published by the Educational Institute of the American Hotel & LodgingAssociation, or any later edition, revision or replacement that Franchisor approves or designates.
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"Yield ManagementSystem"
means any yield management system (including all Software,Hardware and electronic access related thereto) designated or required by Franchisor for use by System
Hotels. The Yield Management System may be part of the Property System.
"Yield Management SystemFee"
means the fee Fmnchisee must pay to Franchisor representingthe Hotel's share of costs and expenses of the Yield Management System, including development and
incremental operating costs, ongoing maintenance, field support costs, and a reasonable return on capital.
2. LICENSE
2.1 Limited Grant.
Upon the terms of this Agreement, Franchisor hereby grants to Franchisec a limited, non-
exclusive license to use the Proprietary Marks and the System and the right to operate the Hotel as a
System Hotel solely at the Approved Location. Franchisee agrees to identify and operate the Hotel as a
System Hotel in accordance with the System and this Agreement only as and when authorized byFranchisor.
2.2 Franchisor's Reserved Rights.
A. Franchisce agreeS that except as set forth below at Section 2.3: (i) Franchisor
and its Affiliates retain the right, at any location other than the Approved Location, to develop, promote,
construct, own, lease, acquire and/or opemte, or authorize or otherwise license or franchise to other
Persons the right to develop, promote, construct, own, lease, acquire and/or operate Franchisor LodgingFacilities (including other System Hotels) and other business operations; and (ii) Franchisor or its
Affiliates may exercise such right without notice to Franchisee. Franchisee covenants that it will not do
anything that may interfere with the exercise of such right by Fmnchisor or any of its Affiliates.
B. Nothing in this Agreement will prevent Franchisor from allowing other
Franchisor Lodging Facilities operated or franchised or licensed by Franchisor or its Affiliates to use
various components of the System, including the Reservation System, Franchisor and its Affiliates also
have the right to enter into affiliation agreements with other lodging facilities to permit Frequent Traveler
Program members (or members of similar guest recognition programs) to redeem awards for stays at such
lodging facilities.
2.3 Territory.
Neither Franchisor nor its Affiliates will open to the public for business or authorize anyother Person to open to the public for business a System Hotel for a period ending December 31, 2020,within the area having the following boundaries: starting at West 42nd Street and 10th Avenue; proceed
east on West 42nd Street to 7th Avenue; proceed south on 7th Avenue to West 31st Street; proceed west
on West 3 ist Street to 9th Avenue; proceed north on 9th Avenue to West 35th Street; proceed west on
West 35th Street to 10th Avenue; proceed north on 10th Avenue to point of beginning on West 42nd
Street ("Restricted Territory"). The Restricted Territory is the highlighted bordered area as approximatelyset forth on the map attached hereto at Exhibit C. For purposes of delineating the boundary of any of the
roads, highways, rivers or lakes described above, such boundary will be the centerline or approximate
center thereof and will be determined as of the Effective Date. Should a conflict exist between the mapand the narrative description stated above, the narrative will control. The restrictions set forth in this
Section 2.3 will not apply to (i) any System Hotel existing or under development as of the Effective Date
within the Restricted Territory; (ii) any hotel or hotels that are members of a chain of hotels (provided that
such chain has a minimum of four (4) or more hotels in operation), all or substantially all (but in no event
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less than three (3) hotels) of which is acquired by, or merged with, or franchised by or joined through
marketing agreenient with, Franchisor or one of its Affiliates (or the operation of which is transferred to
Franchisor or one of its Affiliates); (iii) any hotel or hotels that are mesibers of a group of hotels that is
(in a single transaction. or combination of related transactions, with a single seller or transferor) acquired
by, or merged with, or franchised by or joined through marketing agreement with, Franchisor or one of its
Affiliates, or the operation of which is transferred to Franchisor or one of its Affiliates, provided that such
group of hotels contains no fewer than three (3) hotels; (iv) any other Franchisor Lodging Facility that is
not included within the System; or (v) if any existing hotel described in (i) above ceases to operate as a
System Hotel, then for each such hotel (if any), an additional hotel that may operate as a System Hotel.
3. FEES
3.1 Application Fee.
Before the execution of this Agreement, Franchisee has paid to Franchisor the
Application Fee as set forth in Schedule 1 in consideration of Franchisor's investigation, review and
approval process and other administrative functions and undertakings in connection with this Agreement.
The Application Fee was earned by Franchisor upon Franchisor's conditional approval of Franchisee's
application and is non-refundable.
3.2 Franchise Fees.
Franchisce must pay to Franchisor the Franchise Fees as set forth in Schedule 1 duringeach Accounting Period. Franchisee must not discount or sacrifice Gross Room Sales (by methods
including the offering of complimentary or reduced-price rooms) in order to further any other business at
or outside of the Hotel Gross Room Sales must be accounted for on an accrual basis.
3.3 Marketing Fund Charges: Special Marketine Program Fees.
A. Franchisee must pay to Franchisor the Marketing Fund Charge as set forth in
Schedule 1 as the Hotel's contribution for Marketing Fund Activities. All sums Franchisor receives under
this Section 3.3.A will be used as described in Section 7.3. Franchisor may modify the Marketing Fund
Charge for hotels in the System, including the Hotel, to reflect the following, as determined byFranchisor: (i) any increase or decrease in the cost of providing, or the scope of, Marketing Fund
Activities; (ii) any change in the method used to allocate the cost of Marketing Fund Activities; or (iii)
any change in the competitive needs of the System. Franchisee agrees to be bound by any such increase
or decrease; provided the total Marketing Fund Charge in any fiscal year will not exceed the maximum
amount specified in Schedule 1. System Hotels operated by Franchisor will make contributions for
Marketing Fund Activities at the same percentage of Gross Room Sales required of franchisees within the
System.
B. Franchisee must pay to Franchisor the Hotel's share, as determined byFranchisor, of the cost of any Special Marketing Program as described in Section 7.4.
3.4 Electronic Systems Fees.
A. Franchisee must pay to Franchisor the Electronic Systems Fees for anyElectronic Systems provided to Franchisee for use at the Hotel.
B. Franchisor reserves the right to change the basis of the allocation of anyF,lectronic Systems Fee to reflect the following, as determined by Franchisor: (i) any increase or decrease
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in the costs and expenses of providing the applicable Electronic System to the Hotel; (ii) any change in
the method Franchisor uses to determine the applicable Electronic Systems Fee payment; or (iii) anychange in the competitive needs of the System, inclüding the right to change the basis for charging for
such Electronic Systems Fec, so long as the charges for the Electronic Systems Fees are computed on a
fair and consistent basis among similarly situated System Hotels or Franchisor Lodging Facilities
receiving the services or utilizing the applicable Electronic Systems at the time such services and
Electronic Systems are utilized.
3.5 Other Charges.
Franchiscc must pay to Franchisor or its Affiliates an amount specified by Franchisor to
pay for (i) any training or orientation (including tuition, supplies, and Travel Expenses) required byFranchisor (including the gencial manager conference regardless of whether Franchisee's personnel
attend) or in which Franchisee elects to participate, (ii) purchasing, staging, programming, installing and
interfacing and upgrading of Hardware and Software for any Electronic Systems, (iii) any goods or
services purchased, leased or licensed by Franchisee from Franchisor or an Affiliate of Frartchisor, and
(iv) any optional or mandatory programs of Franchisor or its Affiliates in which Franchisce participates.
3.6 Travel Expenses and Reimbursement.
Franchisee must pay to Franchisor all Travel Expenses for: (i) individuals designated byFranchisor to provide training or services under this Agreement; and (ii) Franchisor's and its
Affiliates'
corporate and regional representatives visiting the Hotel on specific Hotel business. In addition to such
Travel Expenses, Franchisee must reimburse Franchisor, or such other Person designated by Franchisor,for the salary and other compensation of any individuals providing services to the Hotel, includingtraining.
3.7 Marriott Agreement Payments.
Franchisee must pay any other amounts due to Franchisor or its Affiliates under anyMarriott Agreement or other agreement or debt instrument between Franchisee and Franchisor or its
Affiliates.
3.8 Making of Payments and Performance of Services.
All payments required by Sections 3.2 and 3.3 will be made for each Accounting Period
within fifteen (15) days after the end of each Accounting Period. All other payments eqüired by this
Agicement will be made pursuant to the timing set forth in the invoice forwarded to Franchisee, which
will not be less than ten (10) days after Franchisor issues such invoice. Payments due to Franchisor or its
Affiliates will be paid by wire transfer of immediately available funds or such other method as Fianchisor
approves to the accounts designated by Franchisor. Franchisor has the right to have any service or
obligation of Franchisor under this Agreement be performed by an Affiliate of Franchisor and Franchisee
agrees to accept performance by such Affiliate. Franchisor also has the right to designate that payment be
made to one of its Affiliates instead of Franchisor, and Franchisee must make such payments as
designated.
3.9 Interest on Late Payments.
If any payment by Franchisce to Franchisor under this Agreement is not received on or
before its due date, such payment will be deemed overdue, and Franchisee must pay to Franchisor, in
addition to the overdue amount, interest on such overdue amount which will accrue at a rate per annum
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equal to the Interest Rate from the date such overdue amount was due until paid. Franchisor's entitlement
to interest will be in addition to any other remedies Franchisor may have.
3.10 Taxes.
A. Franchisee must promptly pay when due all Taxes levied or assessed by any Tax
authority relating to the Hotel, Franchisee, this Agreement, any other Marriott Agreement or in
connection with operating the Hotel.
B. Franchisee is responsible for payment of all Taxes, if any, levied on or deducted
from any amounts payable to Franchisor or its Afmiates under this Agreement or any of the other
Marriott Agreements. The amount of such Taxes must be paid by Franchisee to Franchisor or such
Affiliate together with the payment to which it relates or as otherwise required by Applicable Law so that
the amount actually received by Franchisor or such Affiliate in respect of such payment (after payment of
such Taxes) equals the full amount stated to be payable in respect of such payment. To the extent anyApplicable Law requires or allows any such deduction, payment or withholding to be paid by Franchisee
directly to a governmental authority Franchisee tnust account for and pay such amounts promptly and
provide to Franchisor receipts or other proof of such payment promptly upon receipt.
C. If there is a bona fide Dispute by Franchisee as to liability for Taxes, Franchisee
may contest the validity of the amount of the Tax in accordance with Applicable Law, provided that
Franchisee will not permit a Tax sale or seizure by levy of execution or similar writ or warrant, or
attachment by creditor, to occur against any part of the Hotel. If such Dispute involves payments of
Taxes that must be withheld, deducted, and paid by Franchisee related to payments to Franchisor as
described in Sections 3.10.A and 3.10.B, Franchisee must pay such Taxes and submit to the withholding
authority for reimbursement in connection with such Dispute, and Franchisee will be responsible for anyinterest or penalties assessed in connection with any delayed or non-payment.
3.1 I Key Money.
Franchisee acknowledges that Franchisor paid Existing Franchisee One Million Seven
Hundred Fifty Thousand Dollars (S1,750,000.00) ("Key Money") in consideration for the execution and
delivery of the Existing Franchise Agreement by Existing Franchisee and Existing Franchisee's
development of the Hotel and operation of the Hotel for the term set forth in the Existing Franchise
Agreement (which term was to expire on the date that is the expiration date of the Term of this
Agreement). Franchisor's execution of this Agreement is expressly conditioned upon Franchisee's
agreemeñt that, if this Agreement is terrninated or assumed in a Transfer before the last day of the Term,for any reason, other than in connection with a Qualifying Transfer Event, Franchisee will pay to
Franchisor, on or before the effective date of termination, an amount equal to $5,833.33 (which is an
amount equal to the Key Money divided by the number of rnonths from the Opening Date until the last
day of the Term) multiplied by the number of months remaining until the last day of the Tenn (the
"Unamortized Portion of the Key Money"). Franchisee acknowledges that it is obligated to pay the
Unamortized Portion of the Key Money to Franchisor in connection with any termination of this
Agreement hefore the last day of the Term without regard to: (a) the reason for such termination; (b)whether such termination is voluntary or involuntary; (c) whether the Hotel remains in the System after
termination of this Agreement; or (d) whether Franchisor consents to or approves the transaction
pursuant to which this Agreement is terminated; provided, however, Franchisor will not require
Franchisee to pay the Unamortized Portion of the Key Money if this Agreement is terminated or assumed
in connection with a Transfer if each of the following conditions is satisfied in connection with such
Transfer: (x) the Hotel continues to operate in the System after such Transfer; (y) the transferee assumes
the obligations of Franchisee under this Agreement as permitted by Fmnchisor pursuant to Section
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17.2.A(1)(d) (including, the obligation to repay the Unamortized Portion of the Key Money in accordance
with this Section 3.11); and (z) the transferee does not request any modifications to the terms of this
Agreement that, in Franchiser's sole discretion, may trigger an obligation by Franchisor to write off on its
financial statements the Unamortized Portion of the Key Money (a Transfer satisfying the foregoing
conditions, a "Qualifying Transfer Event").
4. TERM
4.1 Tenn.
The term of this Agreement begins on the Effective Date and expires on May 24, 2038
(the "Term").
4.2 Not Renewable.
This Agreement and the rights granted by this Agreement are not renewable and
Franchisee has no expectation of any right to extend the Term.
5. SIZE. FINANCING. CONSTRUCTION, AND RENOVATION
5.1 Size.
A. The Hotel will consist of the number of Guestrooms stated in Exhibit A or such
other number approved by Franchisor.
B. Franchisee may expand the Hotel or construct additional Guestrooms at the
Hotel, but only with Franchisor's prior approval and only in compliance with Section 6. If Franchisor
approves the pmposed addition, Franchisee must pay Franchisor, within fifteen (15) days after receivingnotice of approval, a fee equal to the per-room charge used in calculating the application fec for newlydeveh>ped System Hotels, as specified in the Franchise Disclosure Document, multiplied by the number
of such additional Guestrooms.
5.2 Financing of the Hotel.
Franchisee will not, and will cause each Interestholder in Franchisee to not, incur or
replace any indebtedness that is secured by a lien on or mortgage of the Hotel or the revenues of the Hotel
or pledge of Ownership Interests in Franchisee (whether such indebtedness is incurred (i) individually on
behalf of the Hotel or (ii) on a pooled basis with other hotels or legal entities (a "Financed Pool")) unless
the following conditions are met at the time the indebtedness is incurred or replaced: (1) the indebtedness
is with a Lender; (2) the terms of such indebtedness are consistent with prevailing commercial practices
of Lenders at that time in the country in which the Hotel is located; and (3) there is no violation of Section
17.7 of this Agreement. Franchiscc will give notice to Franchisor of the component hotels and legal
entities in a Financed Pool before incurring such indebtedness.
5.3 Construction/Conversion/Renovation of the Hotel.
Franchisee, at its expense, must start and complete in a timely fashion and to Franchisor's
satisfaction the ceisti-úetion, conversion or rennvation, as the case may be, of the Hotel in accordance
with (i) Exhibit B and (ii) the Standards.
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6. SOURCING AND DESIGN APPROVALS
6.1 Furniture, Fixtures. Equipment, Supplies. and Signage.
A. Franchisee will use only such signs, FF&E, Inventories and Fixed Asset Supplies
that conform to the Standards and are purchased from a supplier or manufacturer designated as"approved"
by Franchisor (or as approved in accordance with Section 6.1.B). Franchisor may designate
approved suppliers, including F anchisor or any of its Affiliates, as the only approved supplier for certain
items. Before seeking approval from Franchisor to purchase FF&E to be used in constructing or
renovating the Hotel Guestrooms, Franchisee will prepare models of the basic types of rooms
(double/double king and/or single), furnish the same with the proposed FF&E, and provide Franchisor an
opportunity to inspect the model rooms to detennine whether such proposed FF&E satisfies the
Standards. Before seeking approval from Franchisor to purchase FF&E to be used in constructing or
renovating the Public Facilitics, Franchisee will prepare detailed drawings of the layout of the Public
Facilities and "colorboards'"
with samples and specifications for Public Facilitics FF&E, and provide
Franchisor an opportunity to review and inspect the same to determine whether such proposed FF&E
satisfies the Standards.
B. The requirements of this Section 6.1 are to ensure that items used at System
Hotels will be unifonn and of high quality to maintain the identity, integrity and reputation of the System.
If Franchiscc proposes to purchase or lease any signs, FF&E, Inventories, Fixed Asset Supplies or other
items not previously approved by Franchisor as meeting the Standards, or from a supplier or manufacturer
that Franchisor has not previously approved, Franchisee and such supplier or manufacturer will submit to
Franchisor, at no cost to Franchisor, sufficient specifications and other infonnation and samples for
Franchisor to determine whether such items meet the Standards. Franchisor may require payment of an
amount not to exceed the cost of such inspection, and Franchisor will not be liable for damage to anysample. Franchisor may require such supplier or manufacturer to demonstrate to Franchisor's satisfaction
that such supplier and/or manufacturer: (i) can manufacture such products to specifications that meet the
Standards; (ii) can deliver them in a timely manner and in sufficient quantities to meet the needs of the
Hotel; and (iii) has insurance protecting Franchisor and its Affiliates against any relevant claims. If the
proposed arrangement involves the supplying or manufacturing of products utilizing Franchisor's
Intellectual Property, Franchisor may also require the supplier or manufacturer to: (a) enter into a written
agreement with Frwnhkor concerning the use of Franchisor's Intellectual Property on terms acceptable to
Franchisor; and (b) demonstrate to Franchisor's satisfaction that it can comply with the tenns of such
agreement. Franchisor may revoke its approval as to future purchases if the supplier or manufacturer at
any time after such approval fails to meet the requirements of this Section 6.1 or the Standards.
6.2 _Design Approval.
A. If Franchisee elects or is required by this Agreement (including, under
Section 11.1) to perform construction work or renovations or refurbishment of the Hotel affecting the
design, character, or appearance of the Hotel, Franchisee will obtain the prior approval of Franchisor that
any such construction work or significant renovations or refurbishment complies with the Standards and
the requirements set forth in this Section 6. Before commencing such construction, renovation or
refurbishment, Franchisee will engage a qualified registered architect, interior designer, and other
qualified consultants and cause them to: (i) adapt the Design Criteria to the Approved Location and to
Applicable Law, including the Americans with Disabilities Act and/or other similar state laws, codes,and/or regulations governing public accommodations for persons with disabilities, (ii) prepare complete
construction documents, including a site plan and amhitectural, mechanical, electrical, civil engineering,
plumbiñg, landscaping and interior design drawings and specifications, and material samples, in each
case, based on the Design Criteria (collectively, the "Renovation Drawings"), and (iii) submit the
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Reiiovation Drawings to Franchisor to review for compliance with the Design Criteria at least sixty (60)days prior to comincncing such construction, renovatio~ or refurbishment. Franchisee will riot deviate
from the Design Criteria in the Renovation Drawings; provided if, due to unique circumstances disclosedto Franchisor prior to the date the Renovation Drawings are submitted to Franchisor, it is necessary to
deviate froin the Design Criteria, all deviations from the Design Criteria, including those that are
necessary to adapt the Design Criteria to the Approved Location, must be clearly designated in a separate
document and submitted to Franchisor along with the Renovation Drawings. Based on the complexity of
the design or the Renovation Drawings, or the amount or type of services requested or needed Franchisor
may charge Vraiichisee an amount equal to One Hundred Thirty Dollars ($130) per person per hour forthe additional time spent reviewing thc Renovation Drawings and inspecting the Hotel, in addition to
'I ravel I'xpenses ol'personnel that inspect the Hotel,
B. If requested by Franchisor, Franchisee will provide to Franchisor the name,
address, and relevant work experience on similar projects for any architect, engineer, design firm or
general contractor that I-raiichisee wishes to retain, and Franchisor will have thirty (30) days after receipt
of such information to notify Franchisee of its election to consent or withhold its consent. Franchisor'selection to consent or withhold its consent will be based on prior experiences of Franchisor and its
Atfiliates with such Person, such Person's general business reputatio~, and such Person's relevant work
experience on similar projects. If Franchisor does not respond to Franchisee within thirty (30) days afterFranchisor's receipt of such information, then Franchisee may retain such Person, Neither Franchisor's
failure to respond within the required time period nor Franchisor's consent to Franchisee's use of suchPerson will be deemed an endorsenient or recoriunendation by Franchisor of any such Person, Franchisee
acknowledges and agrees that Franchisor is not liable for the unsatisfactory performance of any Person
rctaincd by Franchisee.
C. Franchisor will promptly review the Renovation Drawings for coiiipliance withthc Design Criteria. If Franchisor determines that the Renovatioii Drawings do not comply with theDesign Criteria, Franchisor will provide recoinmended changes to Franchisee that Franchisee will
incorporate into thc Renovation Drawings and resubmit to Franchisor for its review. Each party will act
speedily and iii good faith in the preparation, submission, review and revision of the RenovationDrawings. Franchisee will not begin the construction, renovation or refurbishment until Franchisornotifies Franchisee that the Renovation Drawings comply with the Design Criteria. As soon as
reasonably possible after Franchisor notifies Franchisee that the Renovation Drawings comply with theDesigii Criteria, Franchiscc will submit to Franchisor two (2) sets of the final Renovation Drawings,
D. Once finalized, the Renovation Drawings will not be changed, including changesrequired by governmental authorities, without the prior written consent of Franchisor.
E. Franchisee agrees that Franchisee, and not Franchisor or its Affiliates, isresponsible for: (i) ensuring that any design, construction documents, specifications, and anyconstruction, renovation, or refurbishment complies with any Applicable Law, including anyrequirements relating to disabled persons; (ii) any errors or omissions; or (iii) discrepancies (of anynature) in any drawings or specifications. Franchisee further acknowledges and agrees that; (a)I'ranchisor's review of'the Renovation Drawings is limited solely to determining whether the RenovationDrawings comply with the Design Criteria; and (b) Franchisor will have no liability or obligation withrespect to renovation, upgrading or furnishing of the Hotel. Except for Franchisee's own uses related to
its constructio~ or operation of the Hotel, Franchisee will not reproduce, use or permit the usc of any of
the design concepts, drawings, or Standards.
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7. LOCAL ADVERTISING AND MARKETING. PRICING. AND MARKETING FUNDACTIVITIES
7.I Franchisee's Local Advertisine and Marketing Programs and Press Releases.
A. Franchisce will undertake Local Advertising Programs that will be (i) at
Franchisee's expense, (ii) conducted to the extent that Franchisee deems necessary, and (iii) in accordance
with the Standards.
B. Franchisee will prominently use and display in, upon and in connection with the
Hotel: (i) signs and other Marketing Materials and the Proprietary Marks only in the combination,
arrangement, and mmmer approved or required by Franchisor and in accordance with the Standards; and
(ii) such other trade names, trademarks, logos, and designs as may be provided, approved, or required byFranchisor. All signs and Marketing Materials must comply with Applicable Law. Franchisee must not
display in or on the Hotel premises or elsewhere, any sign or Marketing Materials of any kind that does
not comply with the Standards or that Franchisor has not approved or to which Franchisor objects.
Franchisee must submit samples of Marketing Materials not provided by Franchisor or its Affiliates and
obtain prior approval from Franchisor before any public use of such Marketing Materials. If Franchisor,subsequent to its approval of Marketing Materials or Local Advertising Programs, withdraws its approval,Franchisee must immediately cease the use, distribution, and dissemination thereof. Any MarketingMaterials developed by Franchisee may be used by other Franchisor Lodging Facilities without
compensation to Franchisee.
7.2 Reservations. Pricing, and Rates.
A. Franchisee must provide its prices and rates for use in the Reservation System as
requested by Franchisor or in accordance with the Standards. Franchisee must: (i) honor any prices,
rates, or discounts that appear in the Reservation System, or any other publication, system, program, or
promotion (written or electronic); (ii) honor all reservations made through the Reservation System or that
are otherwise confirmed; and (iii) not charge any Hotel guest a rate higher than the rate specified at the
time that the Hotel guest's reservation was made, according to the records of the Reservation System or,if not made through the Reservation System, the record of the reservation. Franchisee will also honor all
other contracts or pricing and terms for meeting rooms or any other activity or service at or in connection
with the Hotel.
B. Franchisee is responsible for setting its own prices and rates for Guestrooms and
other products and services at the Hotel and determining any prices or rates that appear in the Reservation
System or any other publication or system (written or electronic) that lists any prices or rates for the
Hotel. Franchisor, however, may: (i) prohibit certain types of charges or billing practices that Franchisor
determines are misleading or otherwise detrimental to the System, including price-gouging or incremental
fees for services that guests would nonnally expect to be included in the room charge; (ii) require that
Franchisee price consistently in various distribution channels; or (iii) impose other pricing requirements
permitted or required by Applicable Law.
C. Franchisor may recommend or suggest prices or rates for the products and
services offered by Franchisee or require participation in various sales or revenue marsgement programs
or promotions offered by Franchisor and its Affiliates. Franchisor's recommendations or suggestions
concerning prices or rates are not mandatory; Franchisee is ultimately responsible for determining the
prices or rates at which it offers its products and services, and Franahanr's recommendations or
suggestions are not a representation or warranty by Franchisor that the use of such suggested or
recommended prices or rates will produce, increase, or optimize Frañchisee's profits and Fmnchisor will
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not be liable for any such recommendations or suggestions. This provision expressly includes any prices
or rates for any bookings made by or for Franchisec in connection with any sales activity or program of
Franchisor or its Affiliates in which Franchisee participates.
D. Franchisor may provide Inventory Management or sales services at the request
of, and as Sales Agent for, Franchisee. Franchisor does not represent or warrant that InventoryManagement or sales determinations made by Franchisor will produce, inemase, or optimize Franchisee's
profits, and Franchisor will not be liable for any such determinations. This provision expmssly includes
any prices, rates or bookings affected by any Inventory Management or sales services provided byFranchisor or its Affiliates to Franchisee.
7.3 Marketing Fund Activities.
A. Franchisor and its Affiliates and any of their designees will direct the MarketingFund Activities, including the placement and allocation thereo f. Upon the request of Franchisee,Franchisor will provide to Franchisee an unaudited accounting of the uses of Marketing Funds in anyfiscal year of Franchisor if such request is made no earlier than ninety (90) days and no later than one
hüñdred and eighty (180) days after the end of such fiscal year. Marketing Fund Activities are intended
to promote general public recognition and acceptance of the Proprietary Marks and use of System Hotels,
and Franchisor and its Affiliates, and their designees, are not obligated to make expenditures for the Hotel
on a basis equivalent or proportionate to the Hotel's Marketing Fund Charges or to ensure that anyparticular System Hotel benefits directly or proportionately from Marketing Fund Activities or
expenditures. Marketing Fund Activities may not necessarily include all of the System Hotels and some
Marketing Fund Activities may benefit or include other Franchisor Lodging Facilities in addition to
System Hotels,
B. Franchisor reserves the right to: (i) modify or reconstitute the local, regional,national or international scope of the Marketing Fund Activities; and (ii) terminate the Marketing Fund
Activities and establish methods of funding Marketing Fund Activities other than payment of the
Marketing Fund Charge.
C. Franchisor and its Affiliates do not hold Marketing Funds as a trustee or as a trust
fund, and Franchisor and its Attiliates have no fiduciary duty to Franchisec with regard to the
administration, use, or expenditure of Marketing Funds. Marketing Funds may be commingled with other
money of Franchisor and its Affiliates and used to pay: (i) all costs associated with developing, preparing,
producing, directing, administering, researching, conducting, and disseminating Marketing Fund
Activities, as well as the administrative costs and overhead incurred by Franchisor, or any of its Affiliates,with respect to the foregoing (including the cost of salaries and overhead for Franchisor's and itsAffiliates'
personnel involved in Marketing Fund Activities), and (ii) the cost of collecting and
accounting for the Marketing Funds. Franchisor or its Affiliates may (but will not be obligated to) (i)loan money to be used for Marketing Fund Activities and Franchisor reserves the right to charge interest
at then-current market rates with respect to such loans, and (ii) use Marketing Funds to repay any such
loan plus interesL
D. When and if Marketing Materials are produced using Marketing Funds, all
System Hotels will receive a portion of such materials in quantities determined by Franchisor. If
Franchisec requests any Marketing Materials in excess of such portion allocated to Franchisee, Franchisor
will require Franchisec to pay for the costs of such additional Marketing Materials.
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7.4 Special Marketing Programs.
Franchisor and its Affiliates may establish, coordinate, affiliate with, and require
Franchisee's participation in Special Marketing Programs. Special Marketing Programs may vary in
duration, apply on a local, regional, national, or Category basis, or involve clusters or groups of
Franchisor Lodging Facilities utilizing services on a shared basis. Examples of Special MarketingPegrams include cooperative advertising programs, sales and marketing programs, customer satisfaction
programs, travel agency programs, events and Frequent Traveler Programs. Special Marketing Programs
have a cost to Franchisee that is in addition to the Marketing Fund Charge. If Franchisee participates in a
Special Marketing Program, Franchisee will pay for such pmgrams on the same basis as paid by other
participating System Hotels, as contemplated in Section 3.3.B. Franchisee may elect to participate in
such activities or Franchisor may require participation.
8. PROPERTY SYSTEM, RESERVATION SYSTEM. AND OTHER ELECTRONICSYSTEMS
8.1 Systems Installation.
Franchisee must, at its expense, purchase or lease, install, maint-in, and use at the Hotel
all Electronic Systems in accordance with specifications provided by or on behalf of Franchisor and maynot use such Electronic Systems to process administrative functions not specifically related to the System.
8.2 Reservation System.
Franchisor will make the Reservation System available to the Hotel, provided if
Franchisee is in breach of this Agreement and if such breach is not cured within the time period requiredfor cure of such breach under this Agreement, Franchisor may, in addition to any other remedies it mayhave, suspend the Hotel from using the Reservation System for so long as such breach remains uncured.
Franchisee waives all claims against Franchisor and its Affiliates arising from Franchisee's suspension
from the Reservation System under this Section 8.2, other than claims that Frañchisec is not in breach of
this Agreement. Franchisee will cause the Hotel to participate in the Reservation System, will use theReservation System only for the benefit of the Hotel, and will comply with all Standards related to
participation.
8.3 Optional System(s).
If Franchisor makes available optional Electronic System(s) and Franchisee elects to usesuch system(s), Franchisee must, at its expense, purchase or lease, install, maintain, and use at the Hotelall Haniware and Software necessary for the proper and efficient utilization and operation of such
system(s) in accordance with specification provided by or on behalf of Franchisor and pay any feesassociated therewith pursuant to Section 3.4.
8.4 System Communication Costs.
As part of the Property System, Reservations System, Yield Management System and
other systems, Franchisee will: (i) at its cost and expense, use the communication system (such as
telephone or Internet systems) as specified or otherwise approved by Franchisor for System Hotels; and
(ii) be responsible for and pay: (a) charges for any communication system (such as telephone or Intemet
lines) that connects Franchisee's equipment to the Property System, Reservation System, Yield
Management System or other systems; (b) the cost of supplies used in the operation of such equipment;and (c) all other related expenses.
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8.5 Electronic Systems Provided Under License.
The Electrcnic Systems will remain the sole property of Franchisor or any third party
vendors, as applicable. Franchisee will at all times treat the Electronic Systems as confidential. As a
condition to using the Electronic Systems, Franchisee must execute the Electronic Systems License
Agreement. Franchisee acknowledges that the Electronic Systems will be modified, enhanced, replaced,or become obsolete, and that new Electronic Systems will be created to meet the needs of the System and
System Hotels and the continual changes in technology and that any such new Electronic Systems will be
subject to the terms of the Electronic Systems License Agreement. If from time to time Franchisor
determines that it is advisable or necessary to amend or replace the Electronic Systems License
Agreement as a result of the creation, modification, enhancement, replacement or obsolescence of anyElectronic Systems, Franchisee, upon the request of Franchisor, will execute the theo-current form of
Electronic Systems License Agreement or an amendment to the Electronic Systems License Agreement.
9. OPERATIONS
9.1 Oneratine the Ilotel.
A. Franchisee will operate the Hotel using the System, in compliance with the
Standards, and in such a manner as to provide courteous, uniform, respectable, and high quality lodgingand other services and conveniences to the public. Franchisee will maintain a high moral and ethical
standard and atmosphere at the Hotel. Franchisee will:
(1) permit the duly authorized representatives of Franchisor to: (i) enter
Franchisee's facilities and inspect same at all reasonable times to confirm that Franchisee is complyingwith the terms of this Agreement and the Standards; and (ii) test any and all equipment, food products,and supplies located at the Hotel. Franchisee may be required to pay any costs related to such inspections
and provide free lodging to any such inspector or inspectors on official duty for such time as may be
reasonably necessary;
(2) not knowingly permit gambling to take place at the Hotel (except for a
limited number of reputable charitable events permitted by law) or use the Hotel for any casino, lottery, or
other type of gaming activities;
(3) not sell, display or use in the Hotel any vending machines, honor bars (in
Guestrooms), entertainment devices, or similar products that have not been previously approved by
Franchisor;
(4) fully participate in all customer surveys and guest satisfaction audits andoffer all guest services, which may include complimentary services, as Franchisor may prescribe forSystem Hotels including programs and services for senior citizens, children and frequent guests;
(5) fully participate in travel agent programs, any complaint resolution and
other programs as Franchisor may reasonably establish for System Hotels, which programs may include
providing complimcñtary rooms or refunds to guests; and
(6) except as otherwisc set forth herein, make when due all payments in
accordance with the terms of all contracts, agreements, and invoices, except for payments that are
disputed by Franchisee in good faith.
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B. Franchisee will provide food and beverage service in the Hotel in conformitywith the Standards to ensure the highest degree of quality and service. Franchisee agrees:
(1) to use any food and beverage service outlet solely for the operation of the
business franchised hereunder; keep any food and beverage service outlet open and in normal operation
for such minimum hours and days as Franchisor may prescribe;
(2) to maintain in sufficient supply, and use at all times, only such food and
beverage peducts and ingredients, supplies, paper goods, dinnerware and furnishings as confonn with the
Standards, and to refrain from deviating therefrom without Franchisor's prior written consent; and
(3) to sell or offer for sale only the menu items and beverages prescribed in
the Standards or otherwise approved in writing by Franchisor; to sell or offer for sale all required menu
and beverage items and prepare them in accordance with the Standards; and to discontinue selling and
offering for sale any items as Franchisor may, in its discretion, disapprove in writing at any time.
9.2 System Promotion and Diversion to Other Businesses.
A. Franchisec must use all reasonable means to encourage and promote the use of
System Hotels everywhere. If Franchisee receives a request for reservations or hotel services or
accommodations or use of Public Facilities in any area where a Systern Hotel or other suitable F anchisor
Lodging Facility is located, Franchisec must promptly refer such request to Franchisor or such Franchisor
Lodging Facility. Franchisee will not, without obtaining Franchisor's prior consent, associate or affiliatewith any other hotel business organization that requires Franchisee to refer business to other members of
that organization.
B. Unless Franchisee obtains Franchisor's prior approval, which approval may be
withheld in Franchisor's sole discretion, Franchisee will ensure that no part of the Hotel or the System is
used for or to further or promote or divert business to:
(1) any lodging business (including any other hotel operated by Franchisee
or its Affiliates or in which Franchisee, its Affiliates or a principal of Franchisee or its Affiliates owns or
holds an Ownership Interest) not operated under a trade name or trademark owned by Franchisor or anyof its Affiliates, including advertising or promotion of hotels, vacation or time-sharing facilities (or anysimilar product sold on a fractional or other basis with use rights on a weekly or other periodic basis),conference centers, or other lodging products; or
(2) any other business or concession.
9.3 Employees.
A. Franchisee must ensure that suitable individuals are employed at the Hotel as ageneral manager and other managers (e.g., reservations manager, sales manager, and other department
managers or persons with different titles but similar duties to the foregoing) and that qualified personnel
are employed at the Hotel sufficient to staff all positions at the Hotel as required by the Standards orFranchisor. The general manager and other managers at the Hotel will devote their full time to the
management and operation of the Hotel, and such Persons will not be employed in any other capacitywithout the consent of Frachiser. Franchisee must use its best efforts to ensure that Hotel employees atall times: (i) conduct themselves in a competent and courtcous manner in accordance with the image and
reputation of Franchisor and the System; (ii) wear uniforms designated or approved by Franchisor; and
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(iii) maintain a neat and clean appearance and render competent, sober and courteous service to all
Persons.
B. All hiring decisions at the Hotel will be made solely by Franchisee or its
Management Company (if applicable). Franchisor does not exercise any direction or control over the
employment policies or employment decisions at the Hotel. All employees at the Hotel are solelyemployees of Franchisee or its Management Company (if applicable), not Franchisor, and Franchisee is
not Franchisor's agent for any purpose with regard to Hotel employees.
C. Franchisee agrees that Franchisor has the right to communicate directly with the
general manager and the other managers at the Hotel regarding day-to-day operations of the Hotel, and
such communications will be deemed made to Franchisee. Franchisee authorizes Franchisor to rely on
the statements of such managers as to matters relating to the operation of the Hotel.
9.4 Management and Operation of the Hotel.
A. The Hotel will at all times be operated only by the Person consented to byFranchisor in accordance with this Section 9.4. Such Person (i) may be either (a) Franchisee or (b) if
Franchisor in its sole discretion in connection with the gmnt of the license in this Agreement detennines
that Franchisee does not meet the requirements of this Section 9.4, a management company other than
Franchisee that would perform the day-to-day operations of the Hotel (the "Management Company") and
(ii) is identified in Paragraph 3 of Exhibit A. Franchisee will at all tirnes be responsible for complyingwith the obligations of this Agreement regarding the managemelit and operation of the Hotel
notwithstanding the retention of a Management Company.
B. Any Management Company retained by Franchisee must before taking over
operations of the 110tel: (i) be qualified and consented to by Franchisor; and (ii) together with Franchisee,execute and deliver to Franchisor a Managemeñt Company Acknowledgment. Franchisor's consent to the
Management Company will be evidenced by its counter-execution of the Management CompanyAcknowledgment. Franchisor may withhold its consent to any pmposed Management Company that, in
Franchisor's sole discretion: (a) is not financially capable or responsible; (b) is not sufficientlyexperienced or qualified in managerial skills or operational capacity or capability; (c) is otherwise unable
to adhere fully to the obligations and requirements of this Agreeinent; or (d) does not provide Franchisor
with all information that Franchisor reasonably requests or with access to other businesses that
Managemcat Company operates. Franchisor will have the right, at its option, to review any management
agreeinent between Franchisee and its proposed Management Company for the Hotel to confirm that such
management agreement is consistent with the terms of this Agree11leiit and the Management CompanyAck1mwledgment. Franchisee agrees that Franchisor will be under no obligation to consent to anyproposed Management Company that is (or is an Affiliate of any Person that is) a franchisor or owner of,is under the common control of, is affiliated with, or manages lodging facilities exclusively for the
franchisor or owner of, a lodging facility trade name that is competitive with Franchisor Lodging
Facilities, irrespective of the number of lodging facilities operating under such a trade name. If there is a
change in Control of the Management Company or if the Management Company becomes a Competitor
(or an Affiliate of a Competitor), or if there is a material adverse change to the financial status or
opemtional capacity of the Management Company, Franchisee will, or will cause Management Company
to, promptly notify Franchisor of any such event and Franchisor inay require Franchisee to terminate its
agreement with such Management Company and engage a replacement management company that will be
subject to Franchisor's consent pmcess under this Section 9.4.B. Franchisor will have at least thirty (30)days following Franchisor's receipt of notice and any information Franchisor requests to review and
consent to or reject any such replacement management company.
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C. Franchisee agrees that Franchisor will have the right to communicate directlywith the Managemcat Company and the managers at the Hotel on matters relating to the operation of the
Hotel, and Franchisee authorizes Franchisor to rely on the commimications of such managers or
Management Company as being on behalf of Franchisee.
D. Notwithstanding anything to the contrary set forth in this Agreement, the
Management Company Acknowledgment or Franchisor's Quality Assurance Program, if, during the Term
of this Agreement, the Hotel is placed in the Yellow Zone for any two consecutive tracking periods or in
the Red Zone for any single tracking period under Franchisor's Quality Assurance Program, then
Franchisor may require, in its sole discretion, Franchisee to replace the Management Company with
another management company that has been approved by Franchisor to operate the Hotel; provided,
however, Franchisor shall not require such replacement pursuant to this Section 9.4.D. so long as 365
Management Company, LLC is the Management Company. Such replacement shall occur within sixty
(60) days from the meeipt by Franchisee (or first refusal of delivery) of a written notice by Franchisor
advising Franchisee that it must replace the Management Company. If Franchisee fails to replace
Management Company in accordance with the terms of this Section 9.4.D, then Franchisee shall be in
material default under this Agreemeñt. For purposes of this Section 9.4.D, the terms "YellowZone"
and
"RedZone" refer to the "Yellow
Zone"and the "Red
Zone"(or any comparable replacement terms) as
such terms are used in Franchisor's Quality Assurance Program.
10. TRAINING. COUNSELING, AND ADVISORY SERVICES
10.1 Trainine.
A. The Hotel must be managed by an individual or individuals who have tirnely and
successfully completed the training program(s) required by Franchisor. Franchisor will have the right to
require that the Hotel's or Franchisee's management personnel attend or complete specific training
program(s), including before the opening or conversion of the Hotel or in connection with a Transfer of
Control of Franchisee or the Hotel. Such training courses will be conducted at such time and place as
Franchisor will designate. Franchisee will advise Franchisor of all newly hired management personnel
within thirty (30) days after they commence employment, and such personnel will attend and successfullycomplete such training program(s) within the time frame Franchisor specifies.
B. Franchisec must conduct such training for Franchisee's employees as is required
for them to properly operate, administer and manage the Hotel in accordance with the Standards.
C. Franchisor may offer, and Franchisee may elect to participate in, optional
training courses for personnel engaged in operating or managing System Hotels.
D. Franchisor will have the right to charge tuition, fees or reimbursements described
in Section 3.5 for all educational, training and orientation programs that Franchisor offers, which must be
paid before receiving training materials or attending; provided, however, the tuition charge for courses
conducted by Franchisor will not be greater than the tuition charged for employees attending f om System
Hotels operated by Franchisor. For all programs and activities under this Section 10, whether mandatoryor optional, Franchisce will be responsible for paying all Travel Expenses, and the salary and other
compensation for individuals attending such training. Franchisor reserves the right to require Franchisee
to pay and/or reimburse Travel Expenses of the providers of such training programs and services.
Franchisor reserves the right to require that Hotel employees execute confidentiality agreements in form
and substance satisfactory to Franchisor.
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10.2 Counseline and Advisory Services.
Franchisor will make its representatives available at Franchisor's designated offices at
reasonable hours or to meet in person to consult with and advise (but not provide legal counsel or advice
to) Franchisee regarding the design, operation, and management of the Hotel as a System Hotel. If
Franchisor's representative travels to the Hotel to provide such services, Franchisee must pay the
expenses of such representative while at, going to, and coming from, the Hotel, including Travel
Expenses, and salary or other compensation, in accordance with Section 3.6.
11. PHYSICAL FACILITIES. SUPPLIES.AND GOODS
11.1 Repairs and Maintenance.
A. Franchisee will maintain the Hotel in good repair and tirst-class condition and in
conformity with Applicable Law and the Standards. Franchisee or its Affiliates must fund the cost of all
repairs and alterations at the Hotel. Franchisee will not make any major repairs, alterations, renewals,
replacements, or additions to the Hotel or carry out any material alterations to the Hotel (including the
design, character, or appearance thereof) without first obtaining the prior consent of Franchisor, unless
such repairs, alterations, renewals, replacements, or additions are required by any Applicable Law or are
otherwise required for the continued safe and orderly operation of the Hotel.
B. Franchisee must complete a significant renovation of Guestrooms, Guestroom
corridors and Public Facilities, including (i) replacement of Son Goods at least every five (5) to six (6)years aher the date such Soft Goods were installed and (ii) replacement of Case Goods at least every ten
(10) to twelve (12) years after the date such Case Goods were installed; provided, however earlier or more
frequent renovations or replacements may be necessary to maintain the quality level of the Hotel in
compliance with the Standards and to comply with the Quality Assurance Program. In connection with
replacements in the immediately preceding sentence, the replacement of all Soft Goods or all Case Goods,as the case may be, will be done at the same time rather than being done in a piecemeal fashion or in
phases. If Franchisee cannot demonstrate the date of installation of Soft Goods or Case Goods,Franchisor will determine the date of installation for purposes of the first sentence of this Section I1.1.B
after consultation with Franchisee.
C. in connection with any replacement of Soft Goods or Case Goods, Franchisor has
the right to require Franchisee to upgrade the rest of the Hotel to conform to the building décor, trade
dress, and FF&E required under then-current Standards for System Hotels of similar age. Franchisee will
submit its plans for such upgrading and remodeling to Franchisor for its review and approval prior to
commencing same. Franchisor will promptly review the plans for the limited purpose of determiningwhether the plans comply with the Standards and the applicable renovation scope. Franchisee will not
begin the upgrading and remodeling until Fáuichisor notifies Franchisee that the plans comply with the
Standards and the applicable renovation scope.
12. SYSTEM AND STANDARDS: FRANCHISEE ASSOCIATION
12.1 Compliance with Sy_ste n and Standards.
A. Franchisee agrees that conformity with all aspects of the System and the
Standards is essential in order to maintain the uniform quality and guest service of System Hotels and to
enhance public acceptance of and demand for System Hotels. Therefore, Franchisee agrees that it will
comply with the Standards in all matters involving the Hotel, and operate the Hotel in compliance with
the System, this Agreement, and the other Marriott Agreements.
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B. Franchisor will make the Standards available to Franchisee either in paper copyor in digital, electronic, nr enmputerized form, or in some other form now existing or hereafter developed.
Franchisee must pay a fee to retrieve, review, use, or access the Standards not in paper form. The
Standards will at all times remain the sole property of Franchisor and its Affiliates. Franchisce will at all
times ensure that Franchisce's copy of the Standards is kept up-to-date, and if there is any dispute as to
the contents of the Standards, the then-current Standards will control.
12.2 Modification of the System and Standards.
A. Franchisor and its Affiliates expressly reserve the right, in their Reasonable
Business Judgment, to modify the System and Standards or any part of either and such modifications mayinclude materially changing, adding or deleting elements of the System; provided, however, that anymodification of the Prepiletary Marks under Section 13.2.B(3) may be made in Franchisor's sole
discretion. Franchisce agrees that modifications to the System may be made for all System Hotels or for
any Category thereof.
B. Franchisor may allocate the cost of System modifications to System franchisees,and in such event, Franchisee must contribute to such costs on a fair and consistent basis with other
participating System Hotels or other hotels, as determined by Franchisor. To the extent that such
modification relates to an ongoing program or system, such as the Reservation System, the Yield
Management System, or Property System, or to any new Electronic Systems or other program or system,
ongoing payments related to such modifications will be made in accordance with Section 3.
12.3 Franchisee Association.
If Franchisor should, during the Term, sanction the formation of an association to
consider topics relating to the operation of System Hotels and to make recommendations to Franchisor
regarding such topies and any and all other apprnpriate matters (the "Association"), Franchisee,Franchisor and other System Hotel franchisees and licensees will be eligible for membership and
Franchisee will pay to the Association all dues and assessments authorized by the Association (which will
he consistently applied to all franchisees in the System). The Association will adopt such bylaws and
elect officers as are deemed appropriate, Recommendations of the Association will be transmitted to
Franchisor and regarded by Franchisor as expressing the consensus of members of the Association.
13. PROPRIETARY MARKS AND INTELLECTUAL PROPERTY
13.1 Franchisor's Representations and Resoonsibility Regarding the Proprietary Marks.
A. Franchisor represents with respect to the Proprietary Marks that:
(1) Franchisor and its Affiliates have the right to grant Franchisee the right
to use the Proprietary Marks in accordance with this Agreement; and
(2) Franchisor will take or will cause to be taken all steps reasonably
necessary to preserve and protect the ownership and validity of the Proprietary Marks; provided
Franchisor will not be required to maintain any registration for the Proprietary Marks that Franchisor
determines, in its sole discretion, cannot or should not be maintained.
B. Subject to Franchisee's compliance with the tenns of this Agreement, Franchisor
will indemnify and hold Franchisee harmless against claims that Franchisee's use of the ProprietaryMarks infringes upon the rights of any third party unrelated to Franchisee, if Franchisee gives immediate
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notice of any such claim to Franchisor, pennits Franchisor to have sole control over the defense and
settlement of the claim, and cooperates fully with Franchisor in defending or settling the claim.
13.2 Franchisee's Use of System and Intellectual Prooerty.
A. With respect to Franchisee's use of the System and Intellectual Property under
this Agreement:
(1) Franchisee will use the System and Intellectual Property only for such
uses regarding the operation of the Hotel as are expressly authorized under this Agreement or otherwise
authorized by Franchisor and only in the form and manner authorized by Franchisor, and any use thereof
not so authorized will constitute an infringement of Franchisor's rights as well as a material default of this
Agreement;
(2) Franchisee will use the Proprietary Marks only in substantially the same
places, combination, arrangement, and manner as provided in the Standards or approved by Franchisor.
Franchisee will use the symbol "®," "™," "™"or such symbols or words as Franchisor may designate to
protect the Proprietary Marks;
(3) Franchisee must identify itself as a franchisee or licensee of Franchisor
and the owner and/or operator of the Hotel only as allowed or required by Franchisor and only in a
manner and form designated by Franchisor. Franchisee will not use the Proprietary Marks in any manscr
that would or could imply that Franchisee has an Ownership Interest in the Proprietary Marks, including,an Franchisee's corporate letterhead, business forms, contracts, or business cards, except as set forth in
the Standards;
(4) Franchisee does not have any right to and will not Transfer, sublicense,or allow any Person to use any of the Intellectual Property, except as expressly permitted in this
Agreement;
(5) Franchisee will not use the Intellectual Property to incur any obligation
or indebtedness on behalf of Franchisor or any of its Affiliates;
(6) Franchisee will not use any Proprietary Mark or marks or names that are
similar. in Franchisor's sole opinion, as part of Franchisee's corporate or legal name or in connection with
any business activity or venture (other than the Hotel) or as a road name or address, or apply for
tmdemark or service mark registration of any Proprietary Mark, any variation thereof or any mark similar
to any Proprietary Mark, in the United States or any other jurisdiction, whether alone or in combination
with other trademarks, trade names, trade dress, symbols, logos, slogans, designs, insignia, emblems,devices. or service marks;
(7) Franchisee must: (i) comply with Franchisor's instructions in filing and
maintaining any required business, trade, fictitious, assumed, or similar name registrations; (ii) obtain
Franchisor's prior approval of any name to be so registered; and (iii) indicate in the registration
documents that Franchisee has the right to use such name only subject to the terms of this Agreement.
Franchisee must also execute any documents and take such other action deemed necessary by Franchisor
ur its counsel to protect the Proprietary Marks or maintain their validity and enforceability; and
(8) if litigation involving the Intellectual Property is instituted or threatened
against Franchisee or any notice of such infringement is received by Franchisee, or if Franchisee becomes
aware of any infringement, Franchisee will promptly notify Franchisor in writing and will cooperate fully
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with Franchisor in Franchisor's defense or settlement of such litigation. Franchisee will not make anydemand or serve any notice, orally or in writing, or institute any legal action, or negotiate, litigate,compromise or settle any controversy with respect to any such litigation, without first obtainingFranchisor's prior consent, which consent may be withheld in Franchisor's sole discretion. Franchisor
will have the right to bring such action and to join Franchisee as a party to any action in which Franchisor
is or may be a party as to which Franchisee is or would be a necessary or proper party.
B. Franchisee agrees that:
(1) Franchisor and its Affiliates are, in the aggregate, the owners or licensees
of all right, title, and interest in and to the System (other than Electronic Systems provided by or licensed
hy third parties) and the goodwill associated with and symbolized by the Proprietary Marks;
(2) the Proprietary Marks are valid and serve to identify the System and
those who hold rights to operate hotels under the System;
(3) the Proprietary Marks and other aspects of the System are subject to
replacement, addition, deletion, and other modification by Franchisor (or the Affiliate that owns the
Proprietary Marks) in its sole discretion. If any such action is taken by Franchisor (or the Affiliate that
owns the Proprietary Marks), Franchisee will promptly accept and use such replacement, addition,
deletion, and other modification, and, in the case of the Proprietary Marks, display such changed
Proprietary Marks as if they were part of the System as of the Effective Date (and replace, add, remove or
modify the Proprietary Mark(s) that have been so changed), and Franchisee will bear the cost of
conforming the IIotel to any such replacement, modification, addition, deletion, or other change;
(4) During the Term and thereafter, Franchisee will not directly or indirectly
(i) attack the ownership, title or rights of Franchisor or its Affiliates in and to any part of the System;
(ii) contest the validity of any part of the System or the right of Franchisor to grant to Franchisee the use
of any part of the System (other than Electronic Systems provided by or licensed by third parties) in
accordance with this Agreement; (iii) take any action or refrain from taking any action that could impair,
jeopardize, violate, or infringe any part of the System; (iv) claim adversely to Franchisor or its Affiliates
any right, title, or interest in and to the System; or (v) misuse or harm or bring into dispute the System;
(5) Franchisee has no Ownership Interest in the System. Franchisee's use of
the Intellectual Property and other aspects of the System under this Agreement (including anymodifications, derivatives or additions thereto proposed by or on behalf of Franchisee or its Affiliates)will not give Franchisee any Ownership Interest or other interest in or to the Intellectual Property or anyother aspect of the System, except the nonexclusive license granted by this Agreement. Franchisee
hereby assigns (and will cause each of its employees or independent contractors who contributed to such
modifications, derivatives or additions to assign) to Franchisor, in perpetuity throughout the world, all
rights, title and interest (including the entire copyright and all renewals, reversions and extensions
thercof) in and to all modifications, derivatives and additions to the Intellectual Property and other aspects
of the System proposed by or on behalf of Franchisee or its Affiliates. Franchisee waives (and will cause
each of its employees or independent contmeters who contributed to such modifications, derivatives or
additions to waive) all "moral rights ofauthors"
or any similar rights that Franchisec (or its employees or
independent contractors) may now or hereafter have in the modifications, derivatives and additions to the
Intellectual Property and other aspects of the System proposed by or on behalf of Franchisee or its
Affiliates. Franchisee agrees to execute (or cause to be executed) and deliver to Franchisor anydocuments and to do any acts that may be deemed necessary by Franchisor to perfect or protect the title in
the modifications, derivatives or additions herein conveyed, or intended to be conveyed now or in the
future;
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(6) all goodwill arising from Franchisee's use of the System (other than
Electronic Systems provided by or licensed by third parties) and any other aspect of the System will inure
solely and exclusively to Franchisor's benefit, and upon expiration or tennination of this Agreement, no
monetary amount will be assigned as attributable to any goodwill associated with Franchisee's use of anyaspect of the System; and
(7) the rights in, and license of, the System granted hereunder to Franchisee
are nonexclusive, and thus Franchisor and its Affiliates may:
(a) use and may grant franchises and/or licenses to others to use the
System, and otherwise profit from the System; and
(b) establish, develop, franchise, and license other systems that use
the Intellectual Property and other aspects of the System, without offering or providing Franchisee anyrights in, to, or under such other systems.
C. The provisions of this Section 13.2 will survive the expiration or termination of
this Agreement.
13.3 Franchisee's Use of Other Marjss.
A. Franchisee will not use in any manner any of the System in connection with anyOther Mark(s), without Franchisor's prior approval.
B. Franchisee will not use any name or Other Mark in connection with the Hotel
that may infringe upon or tend to be confused with a third party's trade name, trademark, or other rights
in intellectual property.
C. Franchisee will not use or permit the use of any Other Mark in or at the Hotel or
in any Marketing Materials, advertising of, for, relating to or involving the Hotel or its operation without
Franchisor's prior approval, which approval may be granted or withheld in Fmnchisor's sole discretion.
13.4 Internet Website.
A. With the exception of a website that describes Franchisee's franchise relationshipwith Fmnchisor and as stated in this Section 13.4 or the Standards, Franchisee will not display the
Proprietary Marks on or associate the System with (through a link or otherwise) any website, electronic
Marketing Materials, domain name, address, designation, or listing on the Internet or other
communication system without the express consent of Franchisor. If Franchisor permits Franchisee to
display or use the Proprietary Marks on Franchisec's Internet site, the form, content and appearance of
Franchisee's Internet site, and any modifications thereto, must comply with the Standards and be
approved by Franchisor before it is posted on the Internet so that Franchisor can maintain the common
identity of the System Hotels and the Proprietary Marks.
B. Franchisee acknowledges that the www.marriott.com domain name is the sole
property of Franchisor and its Affiliates. Franchisee will not, directly or indirectly, use, register, obtain or
maintain a registration for any Internet domain name, address, or other designation that contains any
Proprietary Mark or any mark that is in Franchisor's sole opinion confusingly similar, includingmisspellings and acronyms. Upon Franchisor's request, Franchisee must promptly take all steps to cancel
or transfer to Franchisor or its designee any such domain name, address, or other designation under its
control.
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14. CONFIDENTIAL INFORMATION: DATA PROTECTION LAWS
14.1 Confidential Infonnation.
Franchisee will not, during the Tenn or thereafter, without Franchisor's prior consent,which consent may be granted or withheld in Franchisor's sole discretion, copy, duplicate, record,
reproduce, in whole or in part, or otherwise transmit or make available to any"unauthorized"
Person anyConfidential Infonnation. Franchisee may divulge such Confidential Information only to such of
Franchisee's employees or agents as require access to it in o der to operate the Hotel, and only if such
cmployees or agents, as applicable, are apprised of the confidential nature of such information before it is
divulged to them and they are bound by confidentiality obligations substantially similar to those listed
above. All other Persons arc"unauthorized"
for purposes of this Agreement. Franchisee agrees that the
Confidential Information has commercial value and that Franchisor and its Affiliates have taken
reasonable measures to maintain its confidentiality, and, as such, the Confidential Information is
proprietary and a trade secret of Franchisor and its Affiliates. Franchisee will be liable to Franchisor for
any breaches of the confidentiality obligations in this Section 14.1 by its employees and agents.
Franchisee will maintain the Confidential Infonnation in a safe and secure location and will imme intelyreport to Franchisor the theft or loss of all or any part of the Confidential Infonnation.
14.2 Data Protection Laws
Franchisee will: (i) comply with all applicable Data Protection Laws; (ii) comply with all
of Franchisor's requirements regarding the Data Protection Laws contained in the Standards or otherwise;
(iii) refrain from any action or inaction that could cause Franchisor or its Affiliates to breach any of the
Data Protection Laws; (iv) do and execute, or arrange to be done and executed, each act, document and
thing necessary or desirable to keep Franchisor and its Affiliates in compliance with any of the Data
Protection Laws; (v) reimburse Franchisor and its Affiliates for any and all costs incurred in connection
with the breach by Franchisee of such Data Protection Laws or Standards; and (vi) permit Franchisor and
its Affiliates to use any data or other information each of them gathers concerning Franchisee and its
Affiliates in connection with the establi hment and operation of System Hotels by Franchisor and its
Atliliates.
15. ACCOUNTING AND REPORTS
15.1 Books. Records. and Accounts.
Franchisee at its expense must maintain and preserve for the Hotel for at least five (5)years from the dates of their preparation, complete and accurate books, records, and accounts in
accordance with the Unifonn System and United States generally accepted accounting principles,
consistently applied, Applicable Law and the Standards. Franchisee's obligation to preserve such books,records and accounts will survive the expiration or tennination of this Agreement.
15.2 Reports.
A. Upon the request of Franchisor, Franchisee must, at its expense, submit to
Franchisor within fifteen (15) days after the close of each Accounting Period, an operating statement
containing such information required by Franchisor, including the Gross Revenues and Gross Room Sales
for such Accounting Period. In addition, within sixty (60) days after the close of each calendar or fiscal
year, whichever is used by Franchisee for income tax purposes, Franchisee must furnish Franchisor a full
and complete statement of income and expense from the operation of the Hotel for such preceding year,which will he prepared in acco dance with the Unifonn System and United States generally accepted
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accounting principles, consistently applied, Applicable Law and the Standards. The statement must be
piepared in accordance with the Uniform System "IncomeStatement"
with standard line items for those
specified by Franchisor.
B. Franchisee must, at its expense, submit to Franchisor such other miscellaneous
forms, periodic and other reports, records, financial statements, and other information relating to
Franchisee, the Hotel and the Hotel's marketing, sales and guests as Franchisor may reasonably request,in the form and at the times and places specified by Franchisor. Franchisor has the right to access
Franchisee's Property System and Reservation System directly to obtain marketing, sales and guest
information, and Franchisee will take all actions reasonably necessary to provide such access.
15.3 Franchisor Examination and Audit of Hotel Records.
A. Franchisor and its authorized representatives have the right, at any time, but upon
reasonable notice to Franchisee, to: (i) examine and copy, at Franchisee's expense, all books, records,
accounts, and tax returns of Franchisee related to the operation of the Hotel during the five years
preceding such exam 60n; and (ii) have an independent audit made of any of such books, records,
accounts, and tax returns. Franchisee must provide lodging without charge to Franchisor's
representatives or independent auditors while conducting and completing such audits, and Franchisee
must provide such other assistance as may be reasonably requested related to the audit. If an examination
or audit reveals that Franchisee has made underpayments to Franchisor or any of its Affiliates, Franchisee
must immediately pay to Franchisor or such Affiliate upon demand, the amount underpaid plus interest on
the underpaid amount which will accrue thereon at a rate per annum equal to the Interest Rate from the
date such amount was due until paid.
B. If an examination or audit discloses an underStatement of payments due to
Franchisor of five percent (5%) or more for the period being examined or audited, or if the examination or
audit reveals that the accounting procedures are insufficient to determine the accuracy of the calculation
of any payments due, Franchisee must reimburse Franchisor for all costs and expenses connected with the
examination or audit (including reasonable accounting andattorneys'
fees). If the examination or audit
establishes a pattern of underreporting, Franchisor has the right to require that the annual financial reports
due under Section 15.2.A be audited by an independent accounting finn consented to by Franchisor. The
foregoing remedies are in addition to any other remedies that Franchisor may have under this Agreement,
including the right to terminate this Agreement in accordance with Section 19.
C. If an examination or audit reveals that Franchisee has made overpayments to
Franchisor or any of its Affiliates, the amount of any such overpayment, without interest, will be
promptly credited against future payments due and payable by Franchisee to Franchisor or such Affiliate.
16. INDEMNIFICATION AND INSURANCE
16.1 Indemnification.
Franchisee will, and hereby does, indemnify, defend, and hold harmless Franchisor and
its Affiliates, their officers, directors, agents and employees, and their respective successors and assigns,from and against all losses, costs, liabilities, damages, claims, and expenses of every kind and description,
including allegations of negligence by Franchisor and its Affiliates and their officers, employees, and
agents, to the fullest extent pennitted by Applicable Law, and including reasonableattorneys'
fees,
arising out of or resulting from: (i) the ünantherized use of the Proprietary Marks; (ii) the violation of
Applicable Law; or (iii) the construction, renovation, upgrading, alteration, rernodeling, repair, operation,
ownership or use of the Hotel or the Approved Location or of any other business conducted on, related to,
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or in connection with the Hotel or the Approved Location. Franchisee must promptly give notice to
Franchisor of any action, suit, proceeding, claim, demand, inquiry, or investigation related to the
foregoing. Franchisor will in any event have the right, through counsel of its choice, at Franchisee's
expense, to control the defense or response to any such action to the extent such action affects the
interests of Franchisor, and such undertaking by Franchisor will not, in any manner or form, diminish
Franchisee's obligations to Franchisor hercunder. Under no circumstances will Franchisor or a Person
indemnified hereunder be required or obligated to seek recovery from third parties or otherwise mitigate
its losses in order to maintain a elaim for indemnification against Franchisee under this Agreement, and
the failure to pursue such recovery or mitigate a loss will in no way reduce the amounts recoverable from
Franchisee by a Person indemnified hercüiider. Franchisee's obligations under this Section 16.1 will
survive the termination or expiration of this Agreement.
16.2 Insurance.
A. During the Term, Franchisee, at its expense, will procure and maintain such
insurance as may be required by the terms of any lease or mortgage on the Approved Location, and in anyevent no less than the following:
(1) Property Insurance
(a) Property insurance (or builder's risk insurance during any period
of construction) including boiler and machinery coverage on the Hotel building(s) and contents against
loss or damage by fire, lightniiig, windstorm, and all other risks covered by the usual all-risk policy form,all in an amount not less than ninety percent (90%) of the full replacement cost thereof and a waiver of
co-in3urance and agreed amount endorsement. Said policy will also include coverage for landscape
improvements and law and ordinance coverage in reasonable amounts.
(b) Business interruption insurance covering at least twelve (12)months'
loss of profits and necessary continuing expenses (including Franchise Fees) for interruptions
caused by any occurrence covered by the insurance referred to in Sections 16.2.A(1)(a), (c) and (d). Such
husiness interruption insurance will name Franchisor as a loss payee as its interest may appear.
(c) If the Hotel is located in whole or in part within an areaidentified by the federal government as having a special flood hazard, flood insurance in an amount notless than the maximum coverage available under the National Flood Insurance Program and excess floodcoverage with reasonable limits, but in no event less than ten percent (10%) of the full replacement costof the Hotel building and contents, including business iiiterruption coverage in an amount not less thanthat set forth in Section I6.2.A(1)(b).
(d) If the Hotel is located in an "earthquake pronezone"
or
"windstorm pronezone"
as determiiled by the U.S. Geological Survey or the insurance industry,earthquake insurance and windstorm inmrance in an amount not less than the probable maximum loss
less any applicable deductibles, including business interruption coverage in an amount not less than that
set forth in Section 16.2.A(1)(b), all as determined by a recognized earthquake or windstorm ciigiiicering
firm, as applicable.
(2)Workers'
compensation insurance in statutory amounts on all employees
of the Hotel and employer's liability insurance in amounts not less than S1,000,000 per accident/disease.
(3) Comprehensive or commercial general liability insurance for any losses
arising or pertaining to the Hotel or its operation, with combined single limits of $1,000,000 per each
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occurrence for bodily injury and property damage. If the general liability coverages contain a general
aggregate limit, such limit will be not less than $2,000,000, and it will apply in total to this Hotel only.
Such insurance will be on an occurrence policy form and will include premises and operations,independent contractors, blanket contractual, products and completed operations, advertising injury,employees as additional insureds, broad form property damage, personal injury, incidental medical
malpractice, severability of interests, innkeeper's and safe deposit box liability, third-party discrimination
and harassment liability, and explosion, collapse and underground coverage during any construction,
renovation, upgrading and/or remodeling.
(4) Liquor Liability (applicable when Franchisee distributes, sells, serves, or
furniShes alcoholic beverages) for combined single limits of bodily injury and property damage of not less
than $1,000,000 each occurrence.
(5) Business Auto Liability including owned, non-owned and hired vehicles
for combined single limits of bodily injury and property damage of not less than $1,000,000 each
occurrence.
(6) Umbrella Excess Liability on a following form in excess of the liabilityinsurance required under subsections A(2) through (5) immediately above in not less than the amount set
forth opposite the number of stories in height that the Hotel is above ground as set forth in Schedule 1.
Such coverage will apply in total to the Hotel only by specific endorsement. Franchisor will have the
right to require Franchisee to increase the amount of coverage if, in Franchisor's Reasonable Business
Judgment, such an increase is warranted.
(7) Fidelity insurance coverage or a fidelity bond in an amount not less than
S250,000 per occurrence.
(8) Such other insurance as may be customarily carried by other hotel
operators on hotels similar to the Hotel.
B. The following general insurance requirements will be satisfied by Franchisee:
(1) All insurance under subsection A(l)(b) of this ection will name
Franchisor as a loss payee as their interest may appear, and all insurance under subsections A(3) through
(6) of this Section will by endorsement specifically name as unrestricted additional insureds Franchisor,
any Affiliate of Franchisor designated by Franchisor, and their employees and agents. All insurance
required hereunder will be specifically endorsed to provide that the coverages will be primary and that
any insurance carried by any additional insured will be excess and non-contributory.
(2) Any deductibles or self-insured retentions maintained by Fmnchisee
(excluding deductibles for high hazard risks in high hazard geological zones, such as earthquake and
windstorm, which will be as required by the insumnce carrier) will not exceed $25,000, or such higher
amount as may be approved in advance in writing by Franchisor.
(3) All insurance purchased in compliance herewith will be placed with
insurance companies masonably acceptable to Franchisor and licensed to do business in the state where
the Hotel is located. Such licensing requirement will not apply to those insurers providing umbrella
excess liability above $5,000,000 under subsection A(6) of this Section.
(4) All insurance required hereunder will contain an endorsement wherebythe policies will not be canceled, non-renewed, or materially changed without at least thirty (30) days
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prior notice to Franchisor. Franchisee will deliver to Franchisor a certificate of insurance (or certified
copy of such insurance policy if requested by Franchisor) evidencing the coverages required herein.
Renewal certificates of insurance (or certified copies of such insurance policy if requested by Franchisor)will be delivered to Franchisor not less than ten (10) days prior to their respective inception dates.
(5) All insurance required hereunder may be effected under policies of
blanket insurance that cover other properties of Franchisee and its Affiliates so long as such blanket
insurance fulfills the mquirements herein.
(6) Franchisee's obligation to maintain the insurance hereunder will not
relieve Franchisce of its obligations under Section 16.1.
(7) Should Franchisee for any reason fail to procure or maintain the
insurance required by this Agreement or as revised for substantially all franchisees or licensees in the
United States by the Standards or otherwise in writing, Franchisor will have the right and authority(without however any obligation to do so) to immediately procure such insurance and to charge the cost
thereof to Franchisee, which charges, together with a reasonable fee for Franchisor's expenses in so
acting, will he payable by Fmnchisee linrnediately upon notice.
17. TRANSFERABILITY OF INTERFSTS
17.1 Transfers of Interests in the Hotel and Franchisee.
Franchisee agrees that its rights and duties in this Agreement are personal to Franchisee,and that Franchisor entered into this Agreement in reliance on the business skill, financial capacity, and
character of Franchisee and its principals and Affiliates. A Transfer of any Ownership Interest in
Franchisec, the Hotel or any Ownership Interest in the Hotel, any of Fenchisee's rights or obligations
under this Agreement, or a Transfer of, or change of Control in, Franchisee or a Control Affiliate is
prohibited without the prior written consent of Franchisor except as otherwise set forth in Sections 17 or
18. Upon Franchisor's request, Franchisee will furnish Franchisor with a list of the names and addresses
of the Interestholders in Franchisee and any Control Affiliate (other than holders of Ownership Interests
that am publicly-traded and were purchased on the open market).
17.2 Transfers of Controlling OwnershiMnterests.
A. Except as set forth elsewhere in Sections 17 and 18, if Franchisee or anyInterestholder of Franchisee or a Control Affiliate wishes to Transfer the Hotel, its Ownership Interest in
the Hotel, a dimet or indirect Controlling Ownership Interest in Franchisee, or effect a transaction that
otherwise results in a direct or indirect change of Control in Franchisee, Franchisee will provide notice of
such proposed Transfer to Franchisor. The notice will state the full name and identity of all of the parties
to the proposed Transfer, inclüding Interestholders of such parties and the terms of the Transfer, together
with all other related infonnation that is reasonably requested by Franchisor. Prior Transfers of
Ownership Interests by or to the same Person or an Affiliate of such Person will be considered in
determining whether a Transfer of a Controlling Ownership Interest or change of Control has occurred.
Within thirty (30) days after Franchisor receives such notice and required information, Franchisor will
notify Franchisce of Fnmchisor's election of one of the following two alternatives:
(1) Franchisor's election to consent to such Transfer, together with the
conditions to the Transfer, which may include the following as conditions:
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(a) Franchisee must deliver to Franchisor all documents, information
and representations and warranties with respect to transferee's corporate organization, authority, and
ownership requested by Franchisor, including a complete copy of the sale and purchase agreement or
similar document effecting the Transfer;
(b) Franchisee must satisfy all of its accrued monetary obligations to
Franchisor and its Affiliates, including an amount equal to a reasonable estimate of the costs and fees not
yet accumulated and/or invoiced, and will execute, in a form prescribed by Franchisor, a general release
of any and all claims against Franchisor and its Affiliates, and their respective officers, directors, agents
and employees;
(c) the proposed transferee must complete and submit to Franchisor
a new franchise application together with the then-current application fee being charged to System Hotel
franchisees ("Transfer Fee"). 1f Franchisor does not consent to the Transfer application, Franchisor will
refund the Transfer Fee, less Ten Thousand Dollars ($10,000), which Fmnchisor will retain;
(d) the transferee must do one of the following, as equired byFranchisor in its sole discretion: (i) enter into Franchisor's then-current form franchise agreement and
relevant ancillary agreements, which will contain the standard terms (except for duration, as provided
below) then being issued for new franchised hotels under the System, including the then-current fees and
charges; or (ii) enter into an assignment and assumption agreement and related consent and amendment,in form and substance satisfactory to Franchisor, pursuant to which, among other things, the obligations
of Franchisee under this Agreement and related agreements will be assumed by the transferee, and this
Agreement will be amended to conform as closely as possible to the standard terms (except for duration)of Franchisor's then-current franchise agreement as set forth in the then-current Franchise Disclosure
Document. The new franchise agreement or the assignment and assumption agreement and related
consent and amendment, as the case may be, will be for a tenn that expims on or after the last day of the
Tenn and will provide for the upgrade of the Hotel to address any needed renovations and to bring the
Hotel into compliance with Franchisor's then-current Standards (including Franchisor's Fim Protection
and Life Safety Standards) pursuant to a property improvement plan ("PIP"). Franchisce will payFranchisor's then-current, non-refundable property improvement plan fee (currently, Ten Thousand
Dollars (S10,000)) to cover Franchisor's costs associated with creating the PIP;
(c) the transferee must retain a Management Company consented to
by Fmnchisor to control the day-to-day operations of the Hotel if Franchisor determines that transferee is
not qualified to operate the Hotel;
(f) the transferee must certify in writing that: (i) Franchisor did not
endorse, recommend, or otherwise concur with the terms of the Transfer, (ii) Franchisor did not comment
upon any financial projections submitted by Franchisee to transferce, and (iii) Franchisor did not
participate in the determination of the considerationto be paid;
(g) Franchisor will have the right to require that the tmnsferee payFranchisor's outside counsel costs in connection with any such Transfer; and
(h) if due to the unique ownership structure of the transferee or the
Hotel, Franchisor's limited involvement franchising hotels with such structure (unique or not), the debt
service on the Hotel, or the financial status of the transferee and its owners, Franchisor determines that
additional protections arc necessary, Franchisor may, among other things, require the transferee to
establish and mainmin a reserve to support the cost of future repairs and replacements of FF&E or other
expenditures under the PIP and capital improvements, and the transfeme will deposit into such reserve the
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amount required by Franchisor at the time of the Transfer and each month throughout the tenn of the
franchise agreement.
(2) Franchisor's election not to consent to the Transfer, and Franchisee will
be in breach of this Agreement if Franchisee consummates such Transfer.
B. Franchisor has the right, in its sole discretion, to elect not to consent to a Transfer
under Section 17.2.A(2) if: (i) Franchisor detennines that such transferee is not capable of successfully
operating the Hotel under the franchise agreement or the Standards (and requiring transferee to retain a
Management Company consented to by Franchisor is not an acceptable alternative); (ii) Franchisor
determines that the Management Company proposed by transferee is not capable of successfully
operating the Hotel under the franchise agreement or the Standards or fails to meet Franchisor's then-
curmnt criteria tor Management Companies; (iii) Franchisor determines that the proposed transferee's
debt service or overall financial status will not permit the Hotel to be operated pursuant to the Standards;
(iv) an uncured breach or default of a Marriott Agreement exists; (v) upon execution by transferee of a
new franchise agreement, the transferee would be in breach of such agreement; (vi) the Hotel is not in
good standing under the Quality Assurance Program; or (vii) the Transfer is subject to Section 17.4 or
violates Section 17.8.
C. Subject to Sections 17.4 and 17.8 and compliance with the conditions set forth in
Section I7.2.A(1)(a), (b), (e), (f), (g), and (b), Franchisor will consent to a Transfer of the Hotel or
Franchisec's Ownership Interests in the Hotel or the Ownership Interests in Franchisee or a Control
Affiliate to a Person (a) in which Franchisee has a Controlling Ownership Interest and in which
Franchisee owns, directly or indirectly, at least 50% of the economic interests or (b) in which the
Interestholder that Controls Franchisee has a Controlling Ownership Interest and in which the
Interestholder that Controls Franchisee owns, directly or indirectly, at least 50% of the economic
interests, in either case provided that: (i) Franchisor is provided at least thirty (30) days advance written
notice of such Transfer; (ii) Franchisee provides to Franchisor documentation acceptable to Franchisor
evidencing the Transfer by which such Person expressly assumes the obligations of Franchisee hereunder
and under cach other Marriott Agicement; (iii) another party acceptable to Franchisor has executed a
guaranty substantially identical to the form of guaranty set forth in the then-current Franchise Disclosure
Document (which party may be Franchisee or the transferee depending on the structure of the
transaction) and each and every Guarantor acknowledges the Transfer and reaffirms and ratifies its
obligations under the Guaranty; (iv) Franchisce is not in breach or default under any of the Marriott
Agreements; (v) the liotel is in good standing under the Quality Assurance Program; and (vi) each
beneficial owner of an Ownership Interest in such Person shall have passed Franchisor's then-current
owner screen and paid any applicable fees in connection therewith.
17.3 Transfers of Passive Investor Interests, Estate Planning. and Death or Mental
Incompetency.
A. Subject to Sections 17.4 and 17.8, Transfers of direct or indirect, non-Controlling
Ownership Interests ("Passive Investor Interests") will be consented to by Franchisor if the followingconditions are met: (a) the Passive Investor Interests are not owned by a Guarantor; (b) such Transfer(s),
individually and in the aggregate, will not effect (i) a Transfer of or change in dimet or indirect Control of
Franchisee or the Ilotel (in which case, the provisions of Section 17.2 will apply) or (ii) a Transfer of a
majority of the Passive Investor Interests; (c) Franchisee provides Franchisor notice of such Transfer at
least twenty (20) days prior to the consummation of such Transfer, together with reasonably detailed
information concerning the identity and background of any such transferee and its Interestholders and the
structure of such Transfer, and a representation and warranty that such infonnation is true, corect and
complete and that the requirements of this Section 17.3.A are met; and (d) Franchisee pays the then-
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current fee for background checks for any such transferee and its Interestholders and such background
checks reveal that (x) each such Person has not been convicted of a felony, (y) cach such Person is not
otherwise known to have violated the law, and (z) each such Person's character and reputation otherwise
complies with the Standards. If requested by Franchisor, Franchisee will execute an amcñdment to this
Agiccment that updates the information on Exhibit A regarding the ownership of Franchisee to reflect the
ownership after the Transfer. Franchisor will have the right to require that Franchisee pay Franchisor's
autside counsel costs in connection with any such Transfer.
B. Subject to Sections 17.4 and 17.8, for estate planning, Tmnsfers of an OwnershipInterest in Franchisee to a member of an Interestholder's immediate family or to a trust for the benefit of
such immediate family member or to any Person in which the Interestholder has and, during the Term
continues to have, the Controlling Ownership Interest may be completed in accordance with the
requirements set forth in Section 17.3.A above, so long as such Transfers do not in the aggregate result in
a change of Control of Franchisee.
C. Subject to Sections 17.4 and 17.8, if any Interestholder holding a Controlling
Ownership Interest in Franchisee dies or becomes mentally incompetent, the interest of such person maybe Tmnsferred in accordance with and subject to the terms of Section 17.2.A(1) provided that (i) any such
Transfer will be made within twelve (12) months of the date of death or mental incompetcñcy, (ii) the
obligations of Franchisee under this Agreement are satisfied pending the Transfer, and (iii) the Hotel will
be continuously Operated by Franchisee or a Management Company as required under Section 9.4. If
such death or mental incompetency results in the temporary appointment of an executor, custodian or
other representative for a period not to exceed twelve (12) months, such appointment will not be deemed
a breach of this Section 17 if the conditions above are satisfied, and (x) Franchisor is given notice of such
appointment within thirty (30) days of the date thereof; and (y) the appointee agrees to cause the Hotel to
be operated in compliance with this Agreement.
17.4 Praoosed Transfer to Competitor and Right of First Refusal.
A. If there is a proposed Transfer to a Competitor of (i) the Hotel (or any interest
therein), (ii) Franchisee's Ownership Interest in this Agreernent, or (iii) an Ownership Intemst or other
interest in either Franchisee or a Control Affiliate, Franchisee will give notice thereof to Franchisor,
stating the full name and identity of the prospective purchaser or tenant, as the case may be, including the
names and addresses of the Intemstholders of such prospective purchaser or tenant, the price or rental and
all other tenns of such proposed transaction, together with all other related information that is reasonablyrequested hy Franchisor. Within thirty (30) days after receipt by Franchisor of such notice and
information from Franchisee, Franchisor will notify Franchisee of Franchisor's election, made in its sole
discretion, of one (1) of the immediately following four (4) alternatives:
(1) Acauisition of Control of Hotel for Cash. If the proposed Transfer is a
sale or lease of the Hotel for cash consideration, Franchisor (or its designee) will have the right to
purchase or lease the Hotel at the same price or ental and upon the same terms (other than any terms
relating to the Brand of the Hotel) as those contained in such offer from (or to) a Competitor. In such
event, Franchisee and Franchisor (or its designee) will promptly enter into an agreement for sale or lease
at the price or rental and on terms consistent with such offer.
(2) Acquisition of Franchisee/Acquisition of Control of Hotel. If the
proposed Transfer is a purchase or lease of all or a portion of the Ownership Intemsts or the assets (which
includes the Ilotel) of Franchisee or a Control Affiliate, or a merger with or into Franchisee or a Control
Affiliate, or the acquisition of Franchisee's Ownership Interest in the Hotel, or any sale or lease of the
Hotel involving non-cash consideration, or other fonn of Transfer, Franchisor (or its designee) will have
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the right to purchase or lease the Hotel at the purchase or lease price under terms consistent with such
offer as agreed to by the parties. If the parties are unable to agree as to a purchase or lease price and
terms within fourteen (14) days of Franchisor's election, the purchase or lease price of the Hotel will be
determined as provided below.
(a) Within thirty (30) days after the fourteen (14) day period in this
Section 17.4.A(2) expires, Franchisor and Franchisee will each obtain, at its own expense, an appraisal of
the fair market value of the Hotel from a nationally recognized appraiser of Hotel properties comparable
to the Hotel. In determining the fair market value, the appraisers will assurne that the Hotel is not subject
to a management agreement but is subject to this Agreement. If, after receiving such appraisals, the
parties agree on the fair market value of the Hotel, such agreed fair market value will constitute the
purchase or lease price.
(b) If within fourteen (14) days after receiving the appraisals the
parties are not able to agree on such fair market value, the purchase or lease price will be determined by"baseball
arbitration"in Washington, D.C. in accordance with the Arbitration Rules for the Real Estate
Industry of the American Arbitration Association then in effect ("AAA Rules") as modified by this
Agreement. The parties will jointly select a third party to act as the sole arbitrator (the "Arbitrator") to
determine the fair market value of the Hotel, and such Arbitrator will be a person having at least ten (10)years'
recent professional experience as to the subject matter in question and will be qualified to act as an
Arbitrator in accordance with the AAA Rules. If the parties do not agree on an Arbitrator with such
qualifications within titteen (15) days after the expiration of such fourteen (14) day period referred to
above, the Arbitrator will be appointed by the American Arbitration Association in Washington, D.C. in
accordance with the AAA Rules.
(c) The Arbitrator will be instructed and obligated to decide, within
thirty (30) days after appointment, whether the appraisal submitted by Franchisor or the appraisal
submitted by Franchisee most accurately reflects the fair market value of the Hotel based upon the
appraisals submitted and such infonnation as is normally relied upon by an appraiser of hotels and real
estate. Each party agrees to fully cooperate and provide all information requested by the Arbitrator
related to the Arbitrator's determination of fair market value hereunder. The Arbitrator's choice of
appraisal will be in writing, will constitute the purchase price hereunder, and will be final, conclusive and
binding on the parties as an"award"
under the AAA Rules, and may be enforced by a court of competent
jurisdiction. The expenses of the arbitration will be borne equally by the parties to the arbitmtion.
Pranchisor (or its designee) will have the right, at any time within thirty (30) days of being notified in
writing of the decision of the Arbitrator, to either (a) enter into an agreement to purchase the Hotel
premises and related property at the valuation determined by the Arbitrator, or (b) give notice of its intent
to tenninate this Agreement under Section 19.1.K within fourteen (14) days of such notice. If Franchisor
elects to give notice of its intent to tenninate this Agreement within fourteen (14) days of such notice,upon receipt of Franchisor's election to terminate, Franchisee must either: (i) cancel the Transfer to a
Competitor on or before the end of such fourteen (14) days or (ii) remove the Hotel from the System, payliquidated damages, and otherwise comply with Franchisee's post-termination obligations, in each case,as set forth in Sections 19.3 and 20 or, at Franchisor's election, as may be set forth in a termination
agreement on terms acceptable to Franchisor.
(3) Termination of Franchise Acreement. Franchisor may place Franchisee
in default and give notice of its intent to terminate this Agreement under Section 19.1.K within fourteen
(14) days of such notice. If Franchisor elects to give notice of its intent to tenninate this Agreement
within fourteen (14) days of such notice, upon receipt of Franchisor's election to terminate, Franchisee
must either: (i) cancel the Transfer to a Competitor on or before the end of such fourteen (14) days or (ii)remove the Hotel from the System, pay liquidated damages, and otherwise comply with Franchisee's
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post-tennination obligations, in each case, as set forth in Sections 19.3 and 20 or, at Franchisor's election,as may be stated in a termination agreement on tenns acceptable to Franchisor.
(4) Consent. Franchisor may consent to such Transfer, which consent will be
on such tenns as Franchisor may require, in its sole discretion.
B. If a Competitor proposes to acquire all of the Ownership Interests of an Affiliate
of Franchisee and the Affiliate does not directly or indirectly own, lease, or operate any hotels operatingunder a trade name owned by Franchisor or any of its Affiliates, Franchisor will not have any right of first
refusal to purchase the Hotel or right to terminate this Agreement, as provided above in Section 17.4.A
with respect to such Transfer.
C. 1f the Transfer to a Competitor is by foreclosure, judicial or legal process, or anyother means, Franchisor (or its designee) will have the right to purchase the Hotel upon notice to
Franchisee. 1f the parties are unable to agree as to a purchase price and terms within thirty (30) days of
Franchkor's notice, the fair market value of the Hotel premises and related property will be determined
by arbitration in accordance with Section 17.4.A(2). This provision will survive the termination of this
Agreement under Section 19.1 in connection with the Competitor's actions under this Section 17.4.C.
D. lf Franchisee or any of its Affiliates becomes a Competitor, Franchisee will
notify Franchisor in accordance with Section 17.4.A and provide all information reasonably requested byFranchisor related to becoming a Competitor and required thereby, or if Franchisor otherwise determines
that Franchisee or any of its Affiliates has become a Competitor, Franchisor will so notify Franchisee and
Franchisor will have the rights provided in Section 17.4.A(2) as if the Hotel were subject to a non-cash
offer from a thid party except that Franchisor will have thirty (30) days instead of fourteen (14) to agree
on purchase terms.
17.5 Interest in Real Estate and Iniunctive Relief.
Franchisee acknowledges that Franchisor's rights under Section 17.4 are real estate rights
with respect to the Hotel. Franchisor is entitled to file a record of such interest in and among the
appropriate real estate records of the jurisdiction in which the Hotel is located, and Franchisee will
cooperate as requested by Franchisor in such filing. Such filing will indicate that Franchisor's rights in
real estate under Section 17.4 will be subodinate only to the exercise of the rights of Lenders under a
mortgage or security deed secured by the Hotel if and for so long as: (i) Lender is not a Competitor orAffiliate of a Competitor; (ii) any such mortgage or security deed is and remains validly recorded and infull force and effect; and (iii) the indebtedness underlying such mortgage or security deed complies with
the requirements of Section 5.2. Franchisee agrees that damages are not an adequate remedy if
Franchisce breaches its obligations under such Section 17.4 and that Franchisor will be entitled toinjunctive relief to prevent or remedy such breach without the necessity of proving the inadequacy of
money damages as a remedy and without the necessity of posting a bond. If this Agreement is terminated
and Franchisor's rights under Sections 17.4, 17.5 and 17.6 are no longer in effect, at the request of
Franchiscc or the transferee, Franchisor will deliver upon request an instrument in recordable form to
terminate any such recording of interest in real estate.
17.6 Survival of Rieht of First Refusal.
Except for tennination of this Agreement under Section 17.4.A(3), Franchisee agrees that
Franchisor's rights under Section 17.4 will survive early termination of this Agreement (as opposed toexpiration of this Agreement as provided in Section 4.1) and will bind Franchisee and its Affiliates, if the
events in either Section 17.6.A or Section 17.6.B occur:
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A. before or within six (6) months after termination of this Agreement, a proposed
Transfer to a Competitor occurs with respect to the Hotel, Franchisee or an Affiliate, or an OwnershipInterest in either Franchisce or such Affiliate; and
(1) this Agreement is terminated under (x) Sections 19.1X or L, (y) Section
19.2.B or (z) Section 19.2.D based upon a violation of Section 13.2; or
(2) this Agreement is terminated under Sections 19.1.A, B, C, D or E and an
Affiliate, principal, or director of Franchisee obtains possession of the Hotel, or such Affiliate, principal,or director is the party filing the suit or seeking the execution or foreclosure referenced in Section 19.1.
B. there is a purported early termination of this Agreement (as opposed to expiration
of this Agreement as provided in Section 4.1) by Franchisee and before or within six (6) months after
such purported termination, a proposed Transfer to a Competitor occurs with respect to the Hotel, the
Franchisee or an Affiliate of Franchisee, or an Ownership Interest in either Franchisee or such Affiliate.
17.7 Security Interests in the Hotel or Franchisee.
In connection with any financing benefiting the Hotel or otherwise with respect to the
Hotel, Franchisee will not, and will not allow any Person to, mortgage, grant a security interest in, or
otherwise pledge as collateral the Hotel, the revenues of the Hotel, or an Ownership Interest in Franchisee
or in a Person Controlling Franchisee unless such financing meets the requirements of Section 5.2 or
Franchisor otherwise consents to such financing in writing. Franchisee may not assign, mortgage, or
grant a security interest in, or pledge as collateral, this Agreemcñt. Franchisor has no obligation to
provide a "comfortletter"
in comtection with, or consent to, a transaction that would be prohibited by this
Section 17.7. If a lender forecloses on, or otherwise exercises its rights against the Hotel, the revenues of
the Hotel, or such Ownership interests, or Franchisee violates this Section 17.7, Franchisor will have the
rights under Section 19.1. Franchisor has no obligation to license a lender or any Person acting on behalf
of a lender, including a receiver or servicer of a loan, unless that obligation arises from a valid and
binding written agreement between Franchisor and a lender.
I7.8 Pronosed Transfers to Soecially Desi«nated National or_Blocked Person.
No Transfer of any direct or indirect Ownership Interest in Franchisee, the Hotel or anyMarriott Agreement will be made to a Specially Designated National or Blocked Person or to a Person in
which a Specially Designated National or Blocked Person has an interest or provides funding. Any suchTransfer will be a material default under this Agreement.
17.9 Transfers by Franchisor.
Franchisor will have the right to Transfer this Agreement to any Person without prior
notice to, or consent of, Franchisee, provided such Person (a) assumes Franchisor's obligations toFranchisee under this Agreement, (b) is an Affiliate of Franchisor or acquires substantiaHy all of
Franchisor's rights in respect of System Hotels in the relevant Category, and (c) is a Person reasonablycapable of performing Franchisor's obligations under this Agreement. Franchisee agrees that any such
Transfer will constitute a release and novation of Franchisor with respect to this Agreement. This
Agreement will be binding on and inure to the benefit of Franchisor and the successors and assigns of
Franchisor.
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18. PUBLICLY-TRADED SECURITIES AND SECURITIES OFFERINGS
18.1 Franchisee's Obligations.
A. Publicly-tmded securities in Franchisce or in any Control Affiliate may be
Transferred in compliance with Applicable Law without Franchisor's consent if the Transfer will not
result in a Transfer of Control (as determined by Franchisor) in Franchisee or a Control Affiliate. AnyTransfer of Ownership Interests in Pranchisee or a Control Affiliate that will result in a Tansfer of
Control of Franchisee or any Control Affiliate (as determined by Franchisor) will be subject to
Section 17.2.
B. Without limiting Franchisor's rights under Section 17.2, in connection with anyTransfer of Ownership Interests in Franchisee or a Control Affiliate involving any pmposed public or
private offering of securities that uses in any way the Proprietary Marks, identifies the Hotel, Franchisor
or its Affiliates, or discusses the relationship between Franchisor or its Affiliates and Franchisee or its
Affiliates, Franchisee must also:
(1) provide Fmnchisor with appropriate repmsentation or infonnation
demonstrating the lawfulness of the offering and obtain Franchisor's consent to such use;
(2) fully and unconditionally indemnify and hold harmless Franchisor and its
Affiliates in connection with the Prospectus and the offering;
(3) use any Proprietary Marks in the Pmspectus and in any supporting or
related materials only as appmved by Franchisor in writing; and
(4) submit to Franchisor for its mview at least thirty (30) days before the
earliest of the date on which any Prospectus is delivered to a potential investor or filed with the Securities
and Exchange Commission or any other governmental authority responsible for the regulation of the sale
of securities, a copy of the proposed Prospectus, all supporting and related materials and releases.
Franchisor, in its sole discretion, may require Franchisee to pay for its costs and expenses in performingthe limited review of the pmposed Pmspectus in acconiance with this Section I8, including
attomeys'
fees and expenses.
C. If the indemnification provided for in Section 18.1.B(2) above will for any reason
be unavailable or insufficient to hold Franchisor and its Affiliates harmless in respect of any claim, then
Franchisee will, in lieu of indemnifying Franchisor and its Affiliates, contribute to the amount paid or
payable by Franchisor and its Affiliates as a result of any such claim, action, loss liability, cost, andexpense of any kind, including reasonable
attorneys'fees, in respect thereof, (i) in such pmportion as will
be appropriate to reflect the elative benefits received by Fmnchisor and its Affiliates on the one hand and
Franchisee and its Affiliates on the other or (ii) if (but only it) the allocation provided by clause (i) above
is not pennitted by Applicable Law, in such proportion as is appmpriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of Franchisor and its Affiliates on the one
hand and Franchisee and its Affiliates on the other with respect to any claim, or action in respect thereof,as well as any other relevant equitable considentions. Franchisee and Franchisor agree that it would not
be just and equitable if contributions under this Section 18.1 were to be determined by pro rata allocation
or by any other method of allocation that does not take into account the equitable considemtions mferred
to hemin. Franchisee's obligations under this Section 18.1 will survive the termination or expimtion of
this Agreement.
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18.2 Limited Franchisor Consent.
Franchisor's review of the Prospectus will be conducted solely for the benefit of
Franchisor to determine the accuracy and completeness of any description of Franchisor's relationshipwith Franchisee and compliance with the other requirements of Section 18.1 and not to benefit or protect
any other Person, and its consent will not constitute any kind of authorization, acceptance or agreement,
endorsement, or ratification of the offering or Prospectus, either express or implied.
19. DEFAULT AND TERMINATION
19.1 Enmediate Termination.
Franchisor may terminate this Agreement and all rights granted to Franchisee under this
Agreement without affording Franchisce any opportunity to cure the default, effective immediately upon
notice to Franchisee (or upon such notice period or cure period given by Franchisor in its sole discretion
or as required by Applicable Law), if:
A. Franchisec or any Guarantor becomes insolvent, generally does not payits debts as they become due, admits that any of them is unable to pay its debts as they become due, or
makes a general assignment for the benefit of creditors; or proceedings for a compromise with creditors
are instituted by, against, or consented to by Franchisee or any Guarantor; or
B. Franchisee or any Guarantor files a voluntary petition under any
bankruptcy, insolvency, or similar law, or consents to an involuntary petition under any bankruptcy,
insolvency, or similar law filed against it; or an order approving an involuntary petition in bankruptcy,
insolvency, or similar declaration fded against Franchisee or any Guarantor remains unvacated ninety(90) days after the date of entry thereof; or
C. a court of competent jurisdiction enters an order, judgment, or decree, on
the application of a creditor, adjudicating Franchisee or any Guarantor as bankrupt, insolvent, or similar
status or approving a petition seeking eorganization or appointing a receiver, trustee, or liquidator of all
or a substantial part of Franchisee's or any Guarantor's assets, and such order, judgment, or decree
remains unstayed and in effect for a period of ninety (90) days or will be consented to by Franchisee or
such Guarantor; or
D. execution is levied against the Hotel, Franchisee, or any material real or
personal property comprising the Hotel in connection with a final judgment for the payment of money; or
E. a suit to foreclose any lien, mortgage, or security interest in the Hotel or
any material real or personal property that is a part of the Hotel, or any security interest in Franchisee is
initiated and not vacated within sixty (60) days; or
F. a th eat or danger to public health or safety shall have occurred from the
construction, renovation, epair, refurbishment, upgrading, remodeling, maintenance, or operation of the
Hotel that, in the opinion of Franchisor, could reasonably be expected to result in: (i) substantial liabilityor (ii) an adverse effect on the Hotel, other System Hotels, the System, the Proprietary Marks, or the
goodwill associated therewith; provided, however, Franchisee may request that Franchisor reinstate this
Agreement, and Franchisor will thereafter reinstate this Agreement, if, within six (6) months after
termination under this Section 19.I.F., the threat or danger to public health or safety is eliminated and
Franchisor has determined that such reinstatement would not cause substantial liability or loss of
goodwill; or
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G. Franchisee or any principal, director, officer, shareholder, or agent of
Franchisee contrary to the provisions of this Agreement discloses or causes to be disclosed anyConfidential Infonnation provided to Franchisce or fails to exercise reasonable care to prevent such
disclosure; or
H. (i) any of the representations and warranties by Franchisee under
Sections 22.4 or 27 fails to be true and correct in any material respect when made, deemed made,furnished or as of the date of this Agreement or (ii) any of the representations and warranties byFranchisee under Sections 22.4 or 27 fails to be true and correct at any time during the Tenn; or
1. an inspection of Franchisee's books and records under Section 15.3.B
establishes a pattern of underreporting by Franchisee involving three (3) or more Accounting Periods
within any twenty-four (24) month period; or
J. Franchisee or any Interestholder of a Controlling Ownership Interest in
Franchisee is or has been convicted of a felony or other similar crime or offense or has cñgaged in a
pattern or practice of acts or conduct that is likely in Franchisor's judgment to, as a result of the adverse
publicity that has occurred in connection with such offense, acts, or conduct, adversely affect the Hotel,other System Hotels, the System, the Proprietary Marks, the goodwill associated therewith or
Franchisor's interests therein, any Franchisor Lodging Facility or any other business conducted byFranchisor or any of its Affiliates; or
K. Franchisee becomes a Competitor or an Affiliate of a Competitor or a
Transfer occurs that does not comply with the provisions of Section 17 or 18; or
L. (i) Franchisee dissolves or liquidates, (ii) Franchisee loses its right tomanage or operate the Hotel, (iii) Franchisee loses ownership or the right to possession of the Hotel or the
Approved Location, except as otherwise provided in Section 21, or (iv) the Hotel ceases to operate as a
System Hotel; or
M. Franchisee fails to achieve the thresholds of performance established bythe Quality Assurance Program and such failure has not been cured within the applicable cure period for
such failure under the Quality Assurance Program; or
N. Franchisee or Owner is in default under the Lease or Owner Agreementand such default has not been cured within the applicable cure period, if any, for such default, or the1 ease or Owner Agreement is terminated for any reason.
19.2 Termination Unon Notice with Oonortunity to Cure.
Franchisor may to minate this Agreement and all rights granted to Franchisee hereunder
for the reasons set forth below if (i) Franchisor gives Franchisee notice of default that provides thirty (30)days for cure of the default (or such greater number of days given by Franchisor in its sole discretion or
required by Applicable Law) and identifies the breach or breaches of this Agreement, and (ii) Franchisee
fails to cure in the time and manner specified in the notice of default or as specifically provided in thisSection 19.2:
A. Franchisee fails to do any of the following in a timely manner to
Franchisor's satisfaction: (i) perfonn any of the requirements stated in Exhibit B by the dates mquired for
commencement or completion of such requirements; or (ii) begin or complete any renovation, upair,
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refurbishment, upgrading or remodeling of the Hotel as required by Franchisor under Section 11.1 or anyStandards for the renovation, repair, refurbishment, upgrading or remodeling of the Hotel; or
B. Franchisee and its Affiliates fail to pay any indebtedness to Franchisor or
any of its Affiliates when same becomes due and payable; or
C. any Interestholder of a non-Controlling Ownership Interest in
Franchisee, or any officer, director, or employee of Franchisee is or has been convicted of a felony or
other crime or offense or has engaged in a pattern or practice of acts or conduct that is likely, as a result of
the adverse publicity that has occurred in connection with such offense, acts or conduct, in Franchisor's
judgment, to adversely affect the Hotel, other System Hotels, the System, the Proprietary Marks, the
goodwill associated therewith or Franchisor's interests therein, any Franchisor Lodging Facility or anyother business conducted by Franchisor or any of its Affiliates, and such Person is not terminated from its
relationship with Franchisee; or
D. Franchisee fails to fully comply with the Standards or there occurs anyather breach of this Agreement or any of the other Marriott Agreements.
19.3 Termination by Franchisor and Liquidated Damages.
A. Franchisee has agreed to operate the Hotel as a System Hotel in compliance with
this Agreement for the Term. If Franchisee should fail to do so, Franchisee acknowledges and agrees that
Franchisor would be damaged in several ways, including loss of future Franchise Fees and MarketingFund Charges and injury to the goodwill in the Proprietary Marks. Franchisee acknowledges and agrees
that it is difficult to estimate the revenues of the Hotel over a period of years and that elements of
Franchisor's damages not directly calculated from the Hotel's revenues an"inherently difficult to
calculate and the proofs thereof would be burdensome and costly (although such damages are real and
meaningful to Franchisor and the System). Franchisor and Franchisee agree that liquidated damages
(calculated as set forth in this Section 19.3) are not a penalty and represent a reasonable estimate of just
and fair compensation of Franchisor for the damages that it would suffer if Franchisee should fail to
operate the Hotel as a System Hotel in compliance with this Agreement for the Term. Upon termination
of this Agreement under this Section 19, Franchisee will promptly pay to Franchisor liquidated damages
in an amount equal to (i) the average rnonthly Franchise Fees and Marketing Fund Charges payable to
Franchisor during the previous two (2) years times (ii) the lesser of (x) thirty-six (36) or (y) one-half (l/2)the number of months that would then otherwise remain in the Term. 1f the Hotel has not opened with the
approval of Franchisor or has not been operating as a System Hotel pursuant to a franchise agreement for
at least two (2) years (whether pursuant to this Agreement or a franchise agreement between Franchisor
and a previous franchisee), the following will be used instead of clause (i) in the above calculation: the
greater of (a) the average monthly Franchise Fees and Marketing Fund Charges payable to Franchisor for
the previous two (2) years for all United States System Hotels on a per room basis times the number of
rooms at the Hotel or (b) the average monthly Franchise Fees and Marketing Fund Charges payable for
the Hotel for the period during which the Hotel was opened as a System Hotel; provided that if either
party believes that such calculation would not be representative of the projected stabilized performance of
the Hotel, the party will notify the other in writing and clause (i) in the above calculation of liquidated
damages will be recalculated by multiplying the projected stabilized revenue for the Hotel submitted byFranchisee in its franchise application by the highest percentage rates used to calculate Marketing Fund
Charges and any component of Franchisc Fees in this Agreement.
B. Franchisee further acknowledges and agrees that if this Agreement is terminated
with Special Circumstances (as defined below), Franchisor and the Systern will suffer greater and
fundamentally different damages due to the number or types of Franchisor Lodging Facilities exiting the
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System, which practicably may not be replaceable or, if replaceable, may take longer to replace due to the
Special Circumstances. The consequences of Special Circumstances include significant loss of
distribution in the markets served by the hotels, confusion to customers and loss of customer confidence
due to unavailability of Franchisor Lodging Facilities in locations previously serviced by such Franchisor
Lodging Facilities, disadvantage to Franchisor in competing for national accounts and other bookings,loss of foregone opportunities in markets where the Franchisor Lodging Facilities were located and
increased difficulty in quality System growth. Therefore, Franchisor and Franchisee agree that if this
Agreemcat is tenninated with Special Circumstances a distinct liquidated damages calenlation is
warranted, as described below. If a termination occurs with Special Circumstances, then Franchisee will
pay to Franchisor the amount of liquidated damages that is due under Section 19.3.A times the applicable
percentage stated in the chart below ("Special Circumstances Liquidated Damages"). "SpecialCircumstances" means that, in addition to this Agreement, one or more franchise, license or owner
agreements between Franchisor and Franchisee, or the respective Affiliates of cither, are terminated
within a twelve-month period that includes the termination date of this Agreement and the termination of
any of such agreements together with the termination of this Agmement involve at least one set of
circumstances stated in the first column of the chart below:
2 3-4 5-8 9-15 16-25 >26
Agreements Agreements , Agreements Agreements Agreements Agreements
Terminated Terminated Terminated Terminated Terminated Terminated
5 or More N/A N/A 125% 175% 200% 300%
AgreementsForFranchisor
LodgingFacilities AreTerminated
-3 or More N/A 125% 15002 200% 250% 300%
AgreementsFor
Franchisor
LodgingFacilities InSame StateAreTerminated
3 or More N/A 125% 150% 200% 250% 300%AgreementsFor
Franchisor
LodgingFacilitics in
Top 20% ofRoom Count,FranchiseFees or GSSScore for
RelevantSystem AreTerminated
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2 3-4 5-8 9-15 16 -25 >26Agrccrñcñ‡s AgricG.cñ‡s Agree-n; s AgrccG.c..ts Agreements AgreementsTerminated Termir.äted Termir,ä‡ëd Terminated Terminated Terminated
3 or More N/A 175% 250% 300% 300% 300%AgreementsForFranchisor
LodgingFacilities intSameMetropolitanStatistical
Area AreTernrinated2 or More 150% 175% 250% 300% 300% 300%AgreementsFor
Franchisor
LodgingFacilitiesWith Over
400Guestroomsthat are theMajor Group .
Representatio |n in a
Secondary or
TertiaryMarket AreTerminated .2 or More 150% 175% 250% 300% 300% 300%AgreementsFor
Franchisor
LodgingFacilitiesResorts orHotels forWhich atLeast 50% ofGuests areLeisure
Travelers AreTerminated2 or More 150% 175% 250% 300% 300% 300%AgreementsFor JWMarriottHotels AreTerminated
For each agreement terminated, Special Circumstances Liquidered Damages will be calculated using the
largest applicable percentage multiplier in the chart. By way of example, if six agrccments for Franchiser
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Lodging Facilities are terminated, five of which are for hotels located in the same state (and the five
agreements do not have any other applicable Special Circumstances), and the remaining agreement is fora hotel located in another state (and it does not have any other applicable Special Circumstances), the
percentage multiplier for each of the five agreements for hotels located in the same state will be 150% (in
the chart, see row entitled "3 or More Agreements For Franchisor Lodging Facilities In Same State AreTerminated"
and column entitled "5-8 Agreements Tenninated") and the percentage multiplier for the
remaining agreement will be 125% (in the chart, see row entitled "5 or More Agreemcats For Franchisor
Lodging Facilities AreTerminated"
and column entitled "5-8 Agreements Terminated").
C. If, in connection with the termination of this Agreement, the Hotel is Transferred
to a Competitor, or any other event specified in Section 17.4 occurs, as a result of which Franchisor has
the rights provided therein, and either (x) Franchisee does not comply with Franchisor's right of first
refusal or comply with its other obligations relating to such right of first refusal under Section 17.4 or (y)Franchisor elects to terminate this Agreement or condition its consent to such Transfer on the payment of
liquidated damages, Franchisee will pay to Franchisor the amount of liquidated damages that is due under
Section 19.3.A times one hundred fifty percent (150%) ("Competitor Liquidated Damages"). If the
Transfer to a Competitor also involves Special Circumstances for which the percentage multiplier is
greater than 150%, as detennined under Section 19.3.B, Franchisee will promptly pay to Franchisor
Special Circumstances Liquidated Damages instead of Competitor Liquidated Damages.
D. In addition to liquidated damages, Franchisor will have the right to recover
reasonableattorneys'
fees and court costs incurred in collecting such sums plus interest on all amountsdue under Section 19.3 which will accrue at a rate per annum equal to the Interest Rate from the date such
liquidated damages are due until paid. Such legal remedies will not preclude Franchisor from anyequitable remedies to which it may be entitled under Applicable Law. Franchisee's obligation to payFranchisor liquidated damages, if applicable, and other sums pursuant to Section 19.3 will survivetermination of this Agreement. Payment of liquidated damages to Franchisor will not affect theobligations of Franchisee to take action or abstain from taking action after the termination of this
Agreement as required by Section 19.3 and Section 20 or Franchisor's remedies in the event that
Franchisce does not comply with its obligations thereunder.
20. POST-TERMINATION
20.1 Franchisee Obligations.
A. Upon expiration or other termination of this Agicemcut, all rights granted under
this Agreement to Franchisee will immediately terminate and Franchisee, at its expense, will comply witheach of the following obligations:
(1) Franchisee will immediately cease to operate the Hotel as a System Hotel
and will not directly or indirectly represent or give the impression that it is a present or former franchisee
or licensee of Franchisor or that the Hotel was previously part of the System;
(2) Franchisee will immediately and permanently cease to use and removefrom the Hotel and any other place of business any Intellectual Property and any other identifyingcharacteristics and marks of the System, including any Electronic Systems, signs, fixtures, furniture,
fumishings, equipment, advertising materials, stationery, supplies, forms, or other articles that display any
Proprietary Marks or any trade dress or other distinctive features or designs associated with Franchisor or
the System. Any signs containing any Proprietary Marks that Franchisee is unable to remove from theHotel despite its best efforts upon termination or expiration of this Agreement will be completely covered
by Franchisec from view and. physically removed within twenty-four (24) hours after termination or
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expiration. Franchisee also will immediately remove all content regarding Franchisor, the System, and
the Proprietary Marks from any Internet sites under its control and will take all necessary actions required
by Franchisor to disassociate itself from Franchisor on the Internet. Franchisee will, at Franchisor's
option, cancel or assign to Franchisor or its designee, any domain name owned by or under the control of
Franchisee or its Affiliates that contains any Proprietary Mark, or any mark that is in Franchisor's sole
opinion confusingly similar, including misspellings and acronyms;
(3) Franchisee must take such action as may be necessary to cancel any
fictitious, trade, or assumed name or equivalent registration that contains any Proprietary Mark or anyvariations thereof, and Franchisee must furnish Franchisor with evidence satisfactory to Franchisor of
compliance with this obligation within thirty (30) days after termination or expiration of this Agreement;
(4) Franchisee will immediately turn over to Franchisor the originals and all
copies of any Confidential Information, Intellectual Property, and all other System materials relating to
the operation of the Hotel and the System, or such other information generated by Franchisee through its
use of the System that is deemed confidential by Franchisor, all of which are acknowledged by Franchisee
to be Franchisor's property. Franchisee will not retain a copy or record of any of the foregoing, except
for Franchisee's copy of this Agreement, any correspondence between the parties, and any other
documents that Franchisee reasonably needs for compliance with any provisions of Applicable Law. If
Franchisor pennits Franchisee to continue to use any Intellectual Property after the termination or
expiration date (such permission to be explicit and specific), such use by Franchisee will he in accordance
with the terms of this Agreement;
(5) Franchisee agmes that it will make no use of any of the Confidential
Infonnation or System or disclose or reveal it or any portion thereof to anyone not employed byFranchisor or its franchisees or licensees. Additionally, Franchisee will not assist anyone not franchised
or licensed to use the System in constructing or equipping any hotel premises incorporating the distinctive
features or equipment layout that Franchisor (or any of its Affiliates) owns, has originated, or developed
and which are identifying characteristics of businesses using the System; and
(6) Franchisee will immediately make such alterations as may be necessaryto distinguish the Hotel clearly from its former appearance and other System Hotels in order to prevent
any possibility of confusion by the public. Franchisec will make such specific additional changes as
Franchisor may reasonably request for this purpose. Until all alterations required by this Section 20.1.A
are completed, Franchisee must maintain a conspicuous sign at the registration desk in a form specified
by Franchisor, stating that the Hotel is no longer associated with System Hotels. Franchisee will advise
all customers and prospective customers telephoning the Hotel that the Hotel is no longer associated with
System Hotels.
Franchisee agrees that its failure to comply with any of the requirements of this Section 20.1.A will cause
irreparable injury to Franchisor.
B. Upon expiration or other tennination of this Agreement, Franchisee will
promptly pay: (i) all amounts owing to Franchisor and any of its Affiliates, including, without limitation,the Unamortized Portion of the Key Money; (ii) any costs and expenses incurred by Franchisor, or fees
charged by Franchisor, in connection with removing the Hotel from the System; and (iii) without limitingFranchisee's obligations that relate to the period prior to the date of such tennination, an amount equal to
a reasonable estimate of costs and fees incurred or likely to he incurred, but not yet accumulated, billed
and/or invoiced, which will be due on the date Franchisee is notified of such amount. Franchisor is
entitled to receive interest on any ameTmt not paid when due hereunder which will accrue at a rate per
annum equal to the Interest Rate from the date such payment was due.
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20.2 Franchisor's Rights Upon Tennination or Expiration.
Upon or prior to the termination or expiration of this Agreement, Franchisor may give
notice of the pending expiration or termination of this Agreement to, and take such other action relating
to, customers, suppliers, travel agents, wholesalers, concessionaires, and other Persons that might be
affected by such expiration or terrnination.
20.3 Survival.
The rights and obligations of the parties under this Section 20 will survive termination or
expiration of this Agreement.
21. CONDEMNATION AND CASUALTY
21 J Condemnation.
Franchisee will, at the earliest possible time, give Franchisor notice of any proposed
taking by eminent domain, condemnation, compulsory acquisition, or similar proceeding. If such takingis substantial enough to render impractical the continued operation of the Hotel in accordance with the
System and guest expectations, this Agreement will terminate upon notice by Franchisor or Franchisee to
the other party and the execution and delivery of a termination agreement and release in form and
substance acceptable to Franchisor, and Franchisor and Franchisee, after Franchisee pays to Franchisor
the Unamortized Portion of the Key Money, will share equitably in the enn¼mnation award; provided,
however, Franchisor's portion of such award will be limited to compensating Franchisor for Franchisor's
lost Franchise Fees under this Agreement, which atnount will not exceed the amount of the applicable
liquidated damages due under Section 19.3. Further, if such condemnation is the sole basis for
tennination of this Agreement, Franchisor's portion of such award will be in lieu of paymen: of the
applicable liquidated damages due under Section 19.3. 1f such taking, in Franchisor's opinion, will not
render the continued operation of the Hotel impractical, Franchisee must promptly make whatever tepairs
and restorations are necessary to make the Hotel conform substantially to its condition, character, and
appearance immediately before such taking, according to plans and specifications approved byFranchisor. Franchisee will take all measures necessary to ensure that the resumption of normal operation
of the Hotel is not unreasonably delayed.
21.2 Casualty.
If the Hotel is damaged or destroyed by fire or other cause and such damage or
destruction is substantial and material, affecting over fifty percent (50%) of the Hotel (not including for
these purposes the land constituting part of the Hotel), and necessitates the closing of the Hotel for a
period in excess of ninety (90) days, Franchisee will have the right to terminate this Agreement upon
notice to Franchisor given within one hundred twenty (120) days of such closing of the Hotel if it elects
not to repair or rebuild the Hotel. Franchisee will not be required to pay Franchiser the liquidated
damages due under Section 19.3, but will be required to pay to Franchisor the Unamortized Portion of the
Key Money, in connection with such termination if such casualty is the sole basis for termination of this
Agreement and Franchisee executes and delivers to Franchisor a termination agreement and release in
form and substance acceptable to Franchisor; provided, however, if subsequent to such notice and before
the date on which the Term would otherwise have ended under Section 4 if such notice of termination had
not been given (the "Term Expiration Date"), Franchisee or any of its Affiliates or any Interestholder in
Franchisee with an Ownership Interest of twenty percent (20%) or greater operates a hotel; vacation,
timesharing, interval or fractional ownership facility; condominium; apartment; or other lodging product
at the Approved Location (the "Other I odging Product"), which Other Lodging Product is not operated
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under a license or franchise from Franchisor or one of its Affiliates, then in such event, Franchisee will be
obligated to promptly pay to Franchisor an amount equal to the applicable liquidated damages set forth in
Section 19.3, but elause (ii) in the calculation of liquidated damages in Section 19.3 will be the lesser of
(a) thirty-six (36) or (b) one-half (1/2) the number of months then remsining between (x) the date upon
which the Other Lodging Product is first operated, and (y) the Term Expiration Date. Franchisee's
obligation set forth in this Section 21.2 will survive termination of this Agicenient. If the Hotel does not
close for ninety (90) days or Franchisec does not clect to terminate this Agiccment in accordance with the
provisions of this Section 21.2, the Hotel will be promptly renovated and reopened within a reasonable
time in accordance with the System and pursuant to plans and specifications approved by Franchisor in
accordance with Section 6.2.
22. COMPLIANCE WITH LAWS: LEGAL ACTIONS
22.1 Compliance with Laws.
Franchisee will comply with all Applicable Law, and will obtain in a timely manner all
permits, certificates, and licenses necessary for the full and proper operation of the Hotel and compliance
with the Marriott Agreements. Franchisee will forward to Franchisor within seven (7) days of
Franchisec's receipt copies of all inspection reports, warnings, certificates, and ratings issued by anygovernmental entity related to the Hotel that indicate a material failure to meet or maintain governmental
standards regarding health or life safety or any other material violation of Applicable Law that may
adversely affect the operation or financial condition of the Hotel or Franchisee.
22.2 Notice Regarding Legal Actions.
Franchisee will notify Franchisor within seven (7) days: (i) after the commencement of
any material action, suit, or other proceeding that involves the Hotel or Franchisee; or (ii) after the
commencement of any action, suit, or other proceeding that involves Franchisor or Franchisor's
relationship with Franchisee or the Hotel, and within seven (7) days of the issuance of any judgment,
order, writ, injunction, award, or other decree of any court, agency, or other govermnental instrumentalitythat may adversely affect the operation or financial condition of the Hotel or Franchisee. Nothing in this
Section 22.2, however, will abrogate any notice requirement that Franchisee may have under anyinsurance program or contract.
22.3 WA1VER OF JURY TRIAL AND PUNITIVE DAMAGES.
FRANCHISEE AND FRANCHISOR EACH HEREBY ABSOLUTELY,IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY AND THE RIGHTTO CLAIM OR RECElVE PUNITIVE DAMAGES IN ANY LITIGATION, ACTION, CLAIM,SUIT OR PROCEEDING, AT LAW OR IN EQUITY, ARISING OUT OF, PERTAINING TO ORIN ANY WAY ASSOCIATED WITH THE COVENANTS, UNDERTAKINGS,REPRESENTATIONS OR WARRANTIES SET FORTH HEREIN, THE RELATIONSHIPS OFTHE PARTIES HERETO, WHETHER AS "FRANCHISEE" OR "FRANCHISOR" OR
OTHERWISE, THIS AGREEMENT OR ANY OTHER MARRIOYT AGREEMENT, OR ANYACTIONS OR OMISSIONS IN CONNECTION WITH ANY OF THE FOREGOING.
22.4 Specially Desianated National or Blocked Person: Anti-Monev Laundering.
Franchisee represents and warrants to Franchisor that: (i) neither Franchisee (including
any and all of its directors and officers), nor any of its Affiliates or the funding sources for any of the
foregoing is a Specially Designated National or Blocked Person; (ii) neither Franchisee nor any of its
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Affiliates is directly or indirectly owned or controlled by the government of any country that is subject to
an embargo by the United States governrnent; and (iii) neither Franchisee nor any of its Affiliates is
acting on hehalf of a government of any country that is subject to such an embargo. Franchisee further
represents and warrants that it is in compliance with any applicable anti-money laundering law, includingthe USA Patriot Act. Franchisee agrees that it will notify Franchisor in writing immediately upon the
occurrence of any event that would render the foregoing representations and warranties of this Section
22.4 incorrect.
23. R_ELATIONSIHP OF PARTIES
23.1 Reasonable Business Judgment.
Except where Franchisor has reserved "sole discretion" or as otherwise indicated in this
Agreement, Franchisor agrees to use "Reasonable BusinessJudgment" when discharging its obligations
or exercising its rights or discretion under this Agreement, including with respect to any consents and
approvals and the administration of Franchisor's relationship with Franchisee. "Reasonable BusinessJudgment,"
with respect to the System, means that Franchisor's action or inaction has a business basis
that is intended to: (i) henefit the System or the profitability of the System, including Franchisor,regardless of whether some individual hotels may be unfavorably affected; (ii) increase the value of the
Proprietary Marks; (iii) increase or enhance overall hotel guest or franchisee or owner satisfaction; or (iv)minimize possible brand inconsistencies or custorner confusion. If Franchisor's action or exercise of
discretion is unrelated to the System (e.g., is related to a requested approval with respect to the Hotel), as
described above, Reasonable Business Judgment means that Franchisor has a business basis and has not
acted in bad faith. Franchisee will have the burden of establishing that Franchisor failed to exercise
Reasonable Business Judgment, and neither the fact that Franchisor benefited economically from an
action nor the existence of other "reasonable"alternatives will, by themselves, establish such failure. To
the extent that any imphed covenant, such as the implied covenant of good faith and fair dealing, or civil
law duty of good faith is applied to this Agreement, Fmnchisor and Frenchisee intend that Franchisor will
not have violated such covenant or duty if Franchisor has exercised Reasonable Business Judgment.
23.2 Independent Contractor.
A. This Agreement does not create a fiduciary relationship between Franchisor and
Franchisee. Franchisee is an independent contractor, and nothing in this Agreement is intended to
constitute either party as an agent, legal representative, subsidiary, joint venturer, partner, employee, or
servant of the other for any purpose, except that Franchisor will have the right to act on Franchisee's
behalf as Franchisee's Sales Agent.
B. Nothing in this Agreement authorizes Franchisee to make any contract,
agreernent, warranty, or representation on Franchisor's behalf or to incur any debt or other obligation in
Franchisor's name.
24. GOVERNING LAW: INJUNCTIVE RELIEF: COSTS OF ENFORCEMENT
24.1 Goveming Law.
A. This Agreement takes effect upon its acceptance and execution by Franchisor in
the State of Maryland, United States of America, and will be interpreted and construed under the laws
thereof, which laws will prevail in the event of any conflict of law. Nothing in this Section 24.1 is
intended, or will be deemed, to make the Maryland Franchise Registration and Disclosure Law apply to
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this Agreement, or the transactions or relationships contemplated hereby, if such law otherwise would not
be applicable.
B. Franchisee hereby expressly and irrevocably submits itself to the non-exclusive
jurisdiction of the courts of the State of Maryland, United States of America for the purpose of anyDispute. So far as is permitted under Maryland law, this consent to personal jurisdiction will be self-
operative.
24.2 Injunctive Relief.
Franchisor will be entitled to injunctive or other equitable or judicial relief, without the
necessity of proving the inadequacy of money damages as a remedy, without the necessity of posting a
bond, and without waiving any other rights or remedies at law or in equity, for any actual or threatened
material breach or violation of this Agreement or the Standards.
24.3 Costs of Enforcement.
If for any reason it becomes necessary for either party to initiate any legal or equitable
action to secure or protect its rights under this Agreement, the prevailing party will be entitled to recover
all costs incurred by it in successfully enforcing such rights, including reasonableattorneys'
fees.
25. NOTICES
25.1 Notices.
A. Subject to Section 25.1.B, all notices, requests, demands, statements, and other
communications required or permitted to be given under the terms of this Agreement will be in writingand delivered by hand against receipt, sent by certified mail (postage prepaid and return receipt
requested), or carried by reputable overnight courier service, to the respective party at the followingaddresses:
To Franchisor: Marriott International, Inc.
10400 Fernwood Road
Bethesda, MD 20817
Attn: Law Department 52/923.27
with a copy to: Marriott Intemational, Inc.
10400 Femwood Road
Bethesda, MD 20817
Attn: Vice President, Owner and Franchise Services
Department 51/926.19
To Franchisee: Times Square Hotel Operator, Inc.
272 E. Deerpath Road, Suite 320
Lake Forest, IL 60045
Attn: Michael G. Medzigian
Email: [email protected]
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with a copy to: Paul IIastings LLP
515 S. Flower Street, 25th Floor
Los Angeles, CA 90048
Attn: Rick S. Kirkbride, Esq.
Email: [email protected]
or at such other addmss as designated by notice from the respective party to the other party. Any such
notice or commimication will be deemed to have been given at the date and time of: (A) receipt or first
refusal of delivery, if sent via certified mail or delivered by hand; or (B) one day after the posting thereof,if sent via reputable overnight courier service.
B. Franchisor may provide Franchisee with routine infonnation, invoices, the
Standards and other System requirements and programs, such as the Quality Assurance Program,
including any modifications thereto, by regular mail or by e-mail, facsimile, or by making such
information available to Fmnchisee on the Intemet, an extranet, or other electronic means.
26. CONSTRUCTION AND SEVERABILITY: APPROVALS, CONSENTS AND WAIVERS:
ENTIRE AGREEMENT
26.1 Construction and Sevembility.
A. Except as expressly provided to the contrary in this Agreement, each section,
part, term and/or provision of this Agreement, including Section 16.1, will be considered severable; and
if, for any reason any section, part, term, or provision is determined to be invalid, unenforceable or
contrary to, or in conflict with, any existing or future Applicable Law or by a court or agency having valid
jurisdiction, such will not impair the operation of, or have any other effect upon, such other sections,
parts, terms, and provisions of this Agreement as may remain otherwise intelligible, and the latter will
continue to be given full force and effect and bind Franchisor and Franchisce. To the extent possible,such invalid or unenforceable sections, parts, terms, or provisions will be deemed to be replaced with a
provision that is valid and enforceable and most nearly reflects the original intent of the invalid or
unenforceable provision.
B. No right or remedy conferred upon or reserved to Fraochisor or Franchisee bythis Agreement is intended to be, nor will be deemed, exclusive of any other right or remedy herein or bylaw or equity provided or permitted, but each will be cumulative of every other right or remedy.
C. Nothing in this Agreement is intended, or will be deemed, to create any third
party beneficiary or confer any rights or remedies under or by reason of this Agreement upon any Person
other than Franchisor (and its Atliliates) or Franchisee, and their respective permitted successors and
assigns.
D. When this Agreement provides that Franchisor may take or refrain from taking
any action or exercise discretion, such as rights of approval or consent, or to modify the System or anypart of it, or to make other determinations or modifications under this Agreement, Franchisor may do so
from time to time.
E. Unless otherwise stated, references to Sections are to Sections of this Agreement.
F. Unless otherwise stated, references to Exhibits, Attachments or Addenda are to
Exhibits, Attachments and Addenda to this Agreement, and all of such are incorporated by reference into
this Agreement.
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G. Words importing the singular include the plural and vice versa as the context
may imply. Words importing a gender include each gender as the context may imply.
H. References to days, months, and years are to calendar days, calendar months, and
calendar years, respectively.
1. The words"include," "included"
and"including"
will be terms of enlargement or
example (meaning that, for instance,"including"
will be read as "including but not limited to") and will
not imply any restriction or limitation unless the context clearly requires otherwise.
J. Captions and section headings are used for convenience only. They are not part
of this Agreement and will not be used in construing it.
26.2 Approvals. Consents and Waivers.
Except as specifically provided in Sections 9.3.C and 9.4.C, the Management Company
Acknowledgment, or in Exhibit B, approvals, designations, and consents required under this Agreement
will not be effective unless evidenced by a writing signed by the duly authorized officer or agent of the
party giving such approval or consent. No waiver, delay, omission, or forbearance on the part of
Franchisor or Franchisee to exercise any right, option or power arising from any default or breach by the
other party, or to insist upon strict compliance by the other party with any obligation or condition
hereunder, will affect or impair the rights of Franchisor or Franchisee, respectively, with respect to anysuch default or breach or subsequent default or breach of the same or of a different kind. Any delay or
omission of either party to exercise any right arising from any such default or breach will not affect or
impair such party's rights with respect to such default or breach or any future default or breach.
Franchisor will not be liable to Franchisee for providing (or denying) any waiver, approval, consent, or
suggestion to Franchisee in connection with this Agreement or by reason of any delay or denial of anyrequest.
26.3 Entire Aereement.
As of the date of this Agreement, this Agreement, including, all exhibits, attachments,
and addenda, and the Marriott Agreements contain the entire agreement between the parties as it relates to
the Hotel and the Approved Location. Nothing in this Agreement, however, is intended to require
Franchisee to waive reliance an any representations contained in the Franchise Disclosure Document
referred to in Section 27.4.C. This is a fully integrated agreement.
26.4 Amendments.
No agreement of any kind relating to the matters covered by this Agreement will be
binding upon either party unless and until the same has been made in a written, non-electronic instrument
that has been duly executed by the non-electronic signature of all interested parties. This Agreement may
only be amended in a written, non-electronic instrument that has been duly executed by the non-electronic
signature of all interested parties and may not be amended or modified by conduct manifesting assent, or
by electronic signature. and each party is hereby put on notice that any individual purporting to amend or
modify this Agreement by conduct manifesting assent or by electronic signature is not authorized to do
so.
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27. REPRESENTATIONS. WARRANTIES AND COVENANTS
27.I Existence and Power: Authorization: Contravention
A. Each party represents, warrants and covenants that: (i) it is a legal entity dulyformed, validly existing, and in good steding under the laws of the jurisdiction of its formation; (ii) it
and its Affiliates have and will continue to have the ability to perform its obligations under this
Agicemcat; and (iii) it has and will continue to have all necessary power and authority to execute and
deliver this Agreement.
B. Each party represents, warrants and covenants that the execution and delivery of
this Agreement and the performance by such party of its obligations hereunder: (i) have been dulyauthorized by all necessary action; (ii) do not require the consent, vote, or approval of any third parties
(including lenders) except for such consents as have been properly obtained; and (iii) do not and will not
contravene, violate, result in a breach of, or constitute a default under (a) its certificate of formation,
operating agreemclit, articles of incorporation, by-laws, or other governing documents, (b) any Applicable
Law; or (c) any agreeinent, indenture, contract, commitment, restriction or other instrument to which it or
any of its Affiliates is a party or by which it or any of its Affiliates is bound.
C. Franchisee represents and warrants that all of the representations and warranties
made in the application or any other information provided in connection with this Agreement are true,correct and complete as of the time made and as of the date hereof, regardless of whether such
representations and warranties were provided by Franchisee, one of its Affiliates, or by a third party on
behalf of Franchisec, unless Franchisee has notified Franchisor of a change in the representations and
warranties or the information and Franchisor has approved the change.
27.2 Ownershio of Franchisee.
Franchisee represents and warrants to Franchisor that Franchisee is owned directly and
indirectly as set forth on Exhibit A. Upon the request of Franchisor, Franchisee will submit to Franchisor
evidence, in form and substance satisfactory to Franchisor, confirming that Franchisee is owned directlyand indirectly as set forth on Exhibit A.
27.3 Ownershio of the Hotel.
Franchisee hereby represents, warrants and covenants to Franchisor that (i) Owner is the
sole owner of the IIotel, (ii) the Hotel is leased to Franchisee pursuant to the Lease, and (iii) the Lease
grants Franchisee full and exclusive control of the Hotel and all rights, powers and authority with respectto the Hotel required or desirable for the performance of Franchisee's obligations hereunder. To theextent that the Lease provides that any of the obligations of Franchisee hereunder are to be performed byOwner, Franchisee agrees that it will cause Owner to perform such obligations in accordance with this
Agreement, Franchisee acknowledges and agrees that neither the existence of the Lease nor any terms
thereof that require Owner to perform obligations of Franchisee hereunder will serve as an assignment of
such obligation to Owner (or Franchisor's consent thereto) or will relieve Franchisee of any obligation
under this Agreement, and Franchisee covenants that the Lease shall in no way limit or restrict
Franchisor's rights or remedies under this Agreement.
27.4 Additional Franchiscc Acknowledements and Representations.
A. IN ENTERING THIS AGREEMENT, FRANCHISEE REPRESENTS ANDWARRANTS THAT IT DID NOT RELY ON, AND FRANCHISOR AND FRANCHISOR'S
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REPRESENTATIVES HAVE NOT MADE, ANY PROMISES, REPRESENTATIONS, WARRANTIESOR AGREEMENTS RELATING TO FRANCHIS1NG THE HOTEL OR THE APPROVED
LOCATION, EXCEPT AS EXPRESSLY CONTAINED IN THIS AGREEMENT AND IN THEFRANCHISE DISCLOSURE DOCUMENT REFERRED TO IN SECTION 27.4.C.
B. FRANCHISEE AGREES THAT THE BUSINESS VENTURECONTEMPLATED BY THIS AGREEMENT INVOLVES SUBSTANTIAL BUSINESS RISKS, IS AVENTURE WITH WHICH FRANCHISEE IS FAMILIAR AND HAS RELEVANT EXPERIENCE
AND ITS SUCCESS WILL BE LARGELY DEPENDENT UPON THE ABILITY OF FRANCHISEE
AS AN INDEPENDENT BUSINESS. FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF,AND FRANCHISEE AGREES FRANCHISEE HAS NOT RECEIVED, ANY INFORMATION,WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED, AS TO THE POTENTIAL VOLUME,
PROFITS, OR SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED BY THIS
AGREEMENT. IF FRANCHISOR FURNISHES ADVICE, CONSULTATION, TRAINING, OROTHER FORMS OF ASSISTANCE IN CONNECTION WITH THE HOTEL OR THE APPROVEDLOCATION WITH REGARD TO MATTERS SUCH AS FINANCING, DESIGN, CONSTRUCTION,
RENOVATION, MENU PLANNING, OPERATION AND MANAGEMENT OF THE HOTEL,FRANCHISOR DOES NOT GUARANTEE OR ASSURE THE SUCCESS OR SATISFACTORY
RESULT OF SUCH MATTERS AND FRANCHISOR WILL NOT THEREBY INCUR ANYLIABILITY OR BE RESPONSIBLE IN ANY WAY FOR ANY ERROR, OMISSION OR FAILURE OF
WHATEVER NATURE IN SUCH FINANCING, DESIGN, CONSTRUCTION, RENOVATION,MENU PLANNING, OPERATION OR MANAGEMENT OF THE HOTEL OR THE APPROVEDLOCATION.
C. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE RECEIVED ACOPY OF THIS AGREEMENT, THE EXH1BITS AND ATTACHMENTS HERETO, IF ANY, ANDAGREEMENTS RELATING THERETO, IF ANY, AT LEAST SEVEN (7) CALENDAR DAYSBEFORE THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED. FRANCHISEE
FURTHER ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED THE FRANCHISE
DISCLOSURE DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THEFEDERAL TRADE COMMISSION ENTITLED "DISCLOSURE REQUIREMENTS ANDPROHIBITIONS CONCERNING FRANCHISING," AT LEAST FOURTEEN (14) CALENDAR DAYSBEFORE THE DATE ON WHICH FRANCHISEE EXECUTED THIS AGREEMENT OR MADE ANYPAYMENT TO FRANCIIISOR IN CONNECTION WITH THIS AGREEMENT.
D. FRANCHISEE ACKNOWLEDGES THAT IT HAS READ ANDUNDERSTOOD THE FRANCHISE DISCLOSURE DOCUMENT REFERRED TO IN SECTION
27.4.C. PROVIDED TO FRANCHISEE, THIS AGREEMENT, INCLUDING THE EXH1BITS ANDATTACHMENTS AND ADDENDA HERETO, IF ANY, AND RELATED AGREEMENTS, IF ANY,AND FRANCHISEE HAS HAD AMPLE TIME AND OPPORTUNITY TO CONSULT WITH
ADVISORS AND LEGAL COUNSEL OF FRANCHISEE'S OWN CHOOSING ABOUT THEPOTENTIAL BENEFITS AND RISKS OF ENTERING INTO THIS AGREEMENT. FRANCHISEE
AGREES THAT FRANCHISEE HAS HAD AN OPPORTUNITY TO NEGOTIATE THIS
AGREEMENT.
E. NOTWITHSTANDING FRANCHISEE'S ACKNOWLEDGMENT IN
SECTION 27.4.C ABOVE, FRANCHISEE REPRESENTS THAT FRANCHISEE'S INITIAL
INVESTMENT IN THE FRANCHISED BUSINESS IS IN EXCESS OF ONE MILLION DOLLARS
(Sl,000,000), EXCLUDING THE COST OF UNIMPROVED LAND AND ANY FINANCING
RECEIVED FROM FRANCHISOR OR ITS AFFILIATES AND THUS IS EXEMPTED FROM THE
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FEDERAL TRADE COMMISSION'S FRANCHISE RULE DISCLOSURE REQUIREMENTSPURSUANT TO 16 CFR 436.8(a)(5)(i).
28. MISCELLANEOUS
28.1 Confidential Negotiated Chang_es.
Franchisee acknowledges and agrees that the terms of this Agreement and all exhibits,attachments or addenda or other agreements ancillary to, or executed in connection with this agreement,that have been negotiated ("negotiated tenns") from the standard form of agreements set forth in the
Franchise Disclosure Document referred to in Section 27.4.C are strictly confidential and Franchisee will
not disclose such negotiated terms to any Person without the prior consent of Franchisor except (1) as
required by law, (2) as may be necessary to enforce this Agreement in any legal proceedings, or (3) to
those of Franchisee's managers, members, officers, directors, employees, attorneys, accountants, agents
or lenders as is necessary for the operation or fmancing of the Hotel. It will be a material default
hereunder if Franchisec, its hiañagers, members, ofEcers, directors, employees, attorneys, acesmdañts,agents or lenders disclose the negotiated terms to any unauthorized Person with0üt the prior consent of
Franchisor.
28.2 Multiple Counterparts.
This Agreement may be executed in a number of identical counterparts, each of which
will be deemed an original for all purposes and all of which will constitute, collectively, one agreement.
Delivery of an executed signature page to this Agreement by electronic transmission will be effective as
delivery of a manually signed counterpart of this Agreement.
{Signatures appear on the following page}
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Courtyard byMarriott Hotel Relicensing Franchise Agreement, under seal, as of the Effective Date.
FRANCHISOR:
ATTEST: MARRIOTT INTERNATIONAL, INC.
b,- wad By: SEAL)Aisistant Secretary Name: Adam K. Sherer
Title: Vice Presldent, Franchlsing
FRANCHISEE:
WITNESS: TIMES SQUARE HOTEL OPERATOR, INC.
a Delaware corporation
By: (SEAL)Witness Name:
Title:
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Courtyard byMarriott Hotel Relicensing Franchise Agreement, under seal, as of the Effective Date.
FRANCH1SOR:
ATTEST: MARRIOTT INTERNATIONAL, lNC.
___........, ___ By: (SEAL)Assistant Secretary Name:
Title:
FRANCHISEE:
WITNESS: TIMES SQUARE HOTEL OPERATOR, INC.a Delaware corpo - on
... _. By: (SEAL)Witness Name: ;c.N ack
Title: Qæecocà
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AMENDMENT TO COURTYARD BY MARRIOTT HOTEL RELICENSING FRANCHISE
AGREEMENT REQUIRED BY THE STATE OF ILLINOIS
In recognition of the requirements of the Illinois Franchise Disclosure Act of 1987, Ill. Comp.
Stat. §§ 705/1 to 705/44 (the "lllinois Franchise DisclosureAct" or the "Act"), parties to the attached
FRANCHISE AGREEMENT (the "Agreement") agree as follows:
1. Section 4.2, "NotRenewable,"
of the Agreement shall be supplemented by the following:
If any of the provisions of this Section 4.2 concerning nonrenewal are
inconsistent with the provisions of Section 705/20 of the Illinois Franchise
Disclosure Act, then said provisions of the Act shall apply.
2. Section 19, "Default andTermination,"
of the Agreement shall be supplemented by the
following:
If any of the provisions of this Section 19 governing tennination are
inconsistent with the provisions of Section 705/19 of the Illinois Franchise
Disclosure Act, then said provisions of the Act shall apply.
3. Section 22.3, "WAIVER OF JURY TRIAL AND PUNITIVEDAMAGES."
of the
Agreement shall be deleted in its entirety, and shall have no force or effect, and the following shall be
substituted in lieu thereof:
22.3 WAIVER OF JURY TRIAL AND PUNITIVE DAMAGES.
TO THE EXTENT ALLOWED BY LAW, FRANCHISEE ANDFRANCHISOR EACH HEREBY ABSOLUTELY, IRREVOCABLYAND UNCONDITIONALLY WAIVES TRIAL BY JURY AND THERIGHT TO CLAIM OR RECEIVE PUNITIVE DAMAGES IN ANY
LITlGATION, ACTION, CLAIM, SUIT OR PROCEEDING, AT LAWOR IN EQUITY, ARISING OUT OF, PERTAINING TO OR IN ANYWAY ASSOCIATED WITH THE COVENANTS, UNDERTAKINGS,REPRESENTATIONS OR WARRANTIES SET FORTH HEREIN,THE RELATIONSHIPS OF THE PARTIES HERETO, WHETHER AS"FRANCHISEE" OR "FRANCHISOR" OR OTHERWISE, THIS
AGREEMENT OR ANY OTHER MARRIOTT AGREEMENT, ORANY ACTIONS OR OMISSIONS IN CONNECTION WITH ANY OFTHE FOREGOING.
4. Section 24.1, "GoverningLaw,"
of the Agreement shall be supplemented by the
following:
C. If any of the provisions of this Section 24.1 of the Agreement are
inconsistent with the provisions of Section 705/4 or 705/41 of the Illinois
Franchise Disclosure Act (as cited below in Sections (1) and (2)), then said
Illinois law shall apply to the extent such law is constitutional and the
jurisdictional requirements of the Illinois Franchise Disclosure Act (as
amended) are met.
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(1) See. 705/4. Any provision in a franchise agreement that
designates jurisdiction or venue in a forum outside of this State is void
provided that a franchise agreement may provide for arbitration in a forum
outside of this State.
(2) See. 705/41. Any condition, stipulation, or provision
purporting to bind any person acquiring any franchise to waive compliance
with any provision of this Act or any other law of this State is void. This
Section shall not prevent any person from entering into a settlement
agreement or executing a general release regarding a potential or actual
lawsuit tiled under any of the provisions of this Act, nor shall it prevent the
arbitration of any claim pursuant to the provisions of Title 9 of the United
States Code.
5. Each provision of this Amendment to the Agreement shall be effective only to the extent
that the jurisdictional requiremcñts of the Illinois Franchise Disclosure Act are met independently with
respect to cach such provision and without reference to this Amendment to the Agreement.
6. Franchisor reserves the right to challenge the applicability of any law that declares
provisions in the Agreement void or unenforceable.
{Signatures appear on following page)
771445v3 CY New York Manhattan/Times Square West, NYSS & ES Form 750558v2 (03/3112014)5/20/2014
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment
to the Courtyard by Marriott Hotel Relicensing Franchise Agreement (the "Agreement"), under seal, as of
the day and year first above written in the Agreement.
FRANCHISOR.
MARRIOTT INTERNATIONAL, INC.
ATTEST:
By: SEAL)Assistant Secretary Name: /
Adam K Sherer
Title: /Vice President, Franchising
FRANCHISEE:
WITNESS: TIMES SQUARE HOTEL OPERATOR, INC.
a Delaware corporation
By: (SEAL)Witness Name:
Title:
77l445v3 -- CY New York Men!1eMan/TimesSquare West, NYSS & ES fonn 750558v2 (03/31/20l4)5/20/2014
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IN W TNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment
to the Courtyard by Marriott Hotel Relicensing Franchise Agreement (the "Agreement"), under seal, as of
the day and year first above written in the Agreement.
FRANCHISOR:
MARRIOTT INTERNATIONAL, INC.
ATTEST:
By: (SEAL)Assistant Secretary Name:
Title:
FRANCHISEE:
WITNESS: TIMES SQUARE HOTEL OPERATOR, [NC.
a Delaware corporation
By: (SEAL)Witness Name: WCC. t...ck Ca. eddt ·io-A
Title: Pac s ½rd
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